Nigeria’s financial markets were in a tailspin at the weekend amid concerns over macroeconomic outlook and dodgy currency risks.
Consequently, the naira fell across the official and parallel markets as pressure continued to mount on the national currency on the back of huge unmet foreign exchange (forex) demands.
At the official Investors and Exporters (I & E) Window, naira depreciated by 16 basis points to N464.00 per dollar while it fell by 13 basis points to N743.00 per dollar at the parallel market.
The three-digit gap between the official and parallel markets has sustained pressure on the national currency, with most analysts expecting the forex liquidity crisis to remain in the meantime in the absence of any major policy changes.
Nigeria’s forex reserves cut a 12-week consecutive decline at the weekend with a modest increase of $38.89 million to close at $35.43 billion.
According to analysts, forex liquidity issues will remain as there are no positive signal that denotes an improvement in forex supply in the light of the country’s low forex inflows from domestic sources, such as crude oil production; and foreign portfolio investors.
Specifically, according to analysts at Cordros Capital bemoan lack of any positive signal that denotes an improvement in FX supply relative to the pre-pandemic levels.
“Moreover, considering the tepid accretion to the reserves, given low crude oil production and elevated PMS under-recovery costs, FPIs who have historically supported supply levels in the IEW will be needed to sustain FX liquidity levels in the medium to long-term,” they said.
