Naira Weakens as Forex Turnover Doubles

By BUKOLA ARO-LAMBO and DEBORAH BELLO, Lagos

The value of the naira dropped 0.35 per cent at the close of last weekend despite a marginal appreciation on Friday, closing at N1331.20 to the dollar as against N1326.51 which it began the weeks trading activities.

At the end of Friday’s trading, the value of the naira had appreciated marginally by N0.08 ending four straight days of depreciation. Between Nonday and Thursday, the value of the naira had declined by N4.77.

During Friday’s session, the dollar traded between N1,329.50 and N1,334.50. Trading also picked up sharply. Interbank turnover rose to $162.67 million from $84.22 million on Thursday, an increase of about 93 per cent.

It was the highest level since Tuesday, when turnover stood at $262.12 million. The number of deals also rose to 127 from 104 the day before.

In the parallel market, the dollar was quoted at N1,390 to the dollar leaving a 4.1 per cent gap between it and the official closing rate.

According to analysts at Cowry Assets Management the weakness recorded by the naira reflected sustained demand for the greenback as investors reassessed the relative returns on dollar-denominated assets following recent rate decisions by the U.S. Federal Reserve and Bank of Japan.

“The resulting portfolio adjustments added pressure to the local currency. Despite the depreciation across both markets, the relatively contained movement suggests that the currency remained broadly stable amid heightened demand for foreign exchange.”

Meanwhile, Nigeria’s external reserves increased by 0.33% WoW to $54.67 billion, extending the recent improvement in the country’s external liquidity position. Analysts note that the stronger reserve buffer provides additional support for foreing exchange market liquidity and the CBN’s capacity to meet legitimate dollar demand.

Analysts at Cordros Research say they expect the naira to remain broadly stable around its current level in the near term, supported by resilient portfolio inflows, relatively firm investor sentiment and a widening current account surplus.