The naira recorded a mixed outing at the official and parallel markets at the close of last week.
The Nigerian currency saw a 0.01 per cent appreciation at the National Foreign Exchange Market, where it had closed the week at 1,533.57/$, compared to 1,533.74/$ from the previous week.
According to the Cowry weekly report, at the parallel market, the story was different as the naira declined 0.52 per cent week-on-week to close at an average of 1,545/$1.
This depreciation was blamed on a surge in forex demand, as businesses and individuals sought dollars amid illiquidity.
The National President of the Association of Bureau De Change Operators of Nigeria, Aminu Gwadabe, said liquidity was the main challenge in the FX market as of now, a situation which was exacerbated by seasonal travelling.
“I think the bottom line is liquidity. Yes, we are witnessing a spike in the market. So, that volatility has been there. Many other factors could be responsible. One, I think it’s liquidity; two, it’s the travellers’ demands and other drivers that are putting pressure on the naira,” he said.
In the build-up to the holiday season, Nigerian banks had announced the resumption of the use of naira debit cards for international transactions. This is a reversal from December 2022, when banks notified their customers that naira-denominated debit cards would no longer be permitted for foreign transactions.
Gwadebe added that there appears to be a widening in the spread between the market, which has closed in recent times, effectively quelling speculation.
He said, “The spread between the official market and the open market appears to be widening.”
The experts at Cowry Asset Management Limited expect the naira to sustain its marginal gains in the coming week, supported by the Central Bank of Nigeria’s continued intervention in the foreign exchange market.
“While global trade tensions and volatility in the oil market, particularly the recent downward trend in crude prices, pose potential headwinds, the apex bank’s efforts to inject liquidity and stabilise demand pressures should provide a buffer against sharp depreciation. As such, although external factors may exert intermittent pressure, we anticipate the naira to hold relatively steady, especially at the official window, barring any major shocks in global commodity or financial markets,” the weekly report noted.
- Punch
