The naira bucked a downward trend in the foreign exchange market against the US dollar as demand and supply dislocation pressures eased. Spot FX data from the FMDQ platform revealed that the naira appreciated by 2.51%, closing at ₦1,639.50 per US dollar at the official market.
The huge daily gain was supported by strong investors’ confidence, and the latest FX inflows covering total market demand in the official window.
The Central Bank of Nigeria (CBN) has slowed down the pace of FX intervention to support the local currency, analysts said while discussing the market expectation for 2024.
The naira outlook is mixed, a slew of analysts said at a MarketForces Africa forum, saying unless the CBN withdrawal FX intervention totally, the exchange rate may not cross N1,700.
FX inflows into the official market have been growing, so the FX requests for importation. This keeps the liquidity gap open to be filled by the monetary authority against a willing buyer, willing seller stance.
In December, the CBN will go ahead with FX automation, analysts confirmed, saying this may be the beginning of the real success in the process of achieving currency stabilisation in Nigeria.
“The automated forex market trading will increase confidence, reduce shadow plays by speculative actors and boost liquidity as it will be much easier to track who gets what and for what’, analysts said.
In the parallel market, the naira closed relatively flat at ₦1,725 to the US dollar despite year-end demand for foreign currency. Analysts believe that remittances from Nigerians abroad taken through unofficial window has saturated US dollar availability in the parallel market.
Elsewhere, oil prices continued to decline, extending the sell-off initiated by the U.S. presidential election. The impact of a strong dollar and reduced crude imports in China outweighed the supply risks associated with a Trump presidency and production cuts from Hurricane Rafael.
As a result, Brent crude fell to $75.32, and WTI dropped to $72.00. On the other hand, gold prices increased but remained near a three-week low, with market participants anticipating a rate cut decision from the U.S. Federal Reserve, currently trading at $2,702.50 per ounce.