Naira depreciates against Dollar at spot market

The Naira hits N388.84 against dollar at the spot market due to surging demand for the U.S dollar as Nigeria’s Central Bank begins Fx sales to Nigerian banks ahead of the expected gradual easing of a COVID-19 lockdown.

Spot market is mostly used by foreign portfolio investors and exporters.

The Investors & Exporters FX Window (I&E FX Window) is the market trading segment for investors, exporters, and end users that allows for FX trades to be made at exchange rates determined by prevailing market circumstances, thus ensuring efficient and effective price discovery in the Nigerian FX market.

The naira, this week, plunged to N460 against the American dollar at the black market, before the Central Bank announced yesterday that it would sell $100 million weekly to support people with dollar needs abroad and importers looking to restart economic activities.

Meanwhile, currency traders are expecting the naira to fall slightly more, due to a maturing $1.52 billion April 29 forward contract.

Bosun Obembe, an FX and Derivatives Trader at Access Bank, told CNBC Africa yesterday why the weakening of the naira was expected.

He explained how the naira depreciated at about 20kobo at the investors’ and Exporters window yesterday to close at N386.45 from the previous day’s closing of N386.25.

“Customers with Non-Deliverable Futures will need to buy dollars to claims settlement credit, given that all the contracts settled in the money.

“The additional demand from the contract will exacerbate the already thin inflow in the Investors & Exporters market; as such, the naira will weaken though it’s likely to remain below N390 to $1. Most currency traders are trading within the band N380-390 to the dollar.”

The naira has been under pressure in recent days, as Brent crude price plunged more than 8% WoW to $24.23 barrels per day as at 8.59 am local time, while Nigeria’s foreign exchange reserves further dropped by 0.1% to $33.6 billion.