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The naira had a varied performance at the official and parallel markets at the end of last week.
The Nigerian currency appreciated by 0.01 percent at the National Foreign Exchange Market, closing the week at 1,533.57/$, compared to 1,533.74/$ from the previous week.
As per Cowry's weekly report, the situation was different at the parallel market, where the naira fell by 0.52 percent week-on-week, ending at an average of 1,545/$1.
This drop was attributed to an increase in forex demand as businesses and individuals sought dollars amidst a scarcity of liquidity.
According to Aminu Gwadabe, President of the Association of Bureau De Change Operators of Nigeria, liquidity remains a significant concern in the FX market, worsened by seasonal travel demands.
He suggested that liquidity issues and travelers' needs are putting added pressure on the naira. In anticipation of the holiday season, Nigerian banks announced the revival of naira debit card usage for international transactions, reversing a December 2022 decision that prohibited naira-denominated cards for foreign transactions.
Gwadabe noted an apparent widening gap between the official and open market rates, which had recently narrowed, reducing speculation. Experts at Cowry Asset Management Limited foresee the naira maintaining its slight gains in the coming week, bolstered by the Central Bank of Nigeria’s ongoing interventions in the forex market.
They highlighted that while global trade tensions and declining crude prices could present challenges, the apex bank's actions to inject liquidity and stabilize demand should mitigate sharp declines. Thus, they expect the naira to remain relatively stable, particularly at the official rate, barring significant shocks in global markets.
Additionally, AIICO Capital mentioned that the CBN's clearing of outstanding FX forward contracts had positively impacted the naira's performance at the NFEM. They believe the FX market will remain stable in the short term due to the CBN's ongoing policy adjustments.
Last Thursday, the CBN announced the completion of a forensic audit of FX forward contracts, revealing considerable irregularities in some transactions.
Notable irregularities included discrepancies between company names on sales results and the Form M portal, exceeding approved sales values, and unauthorized imports.
The CBN stated that all legitimate FX contract claims had been settled and that legal action was being considered against violators. With the audit concluded, the CBN confirmed that the issue of undelivered forward contracts has been resolved.
