Naira Drops At Official FX Market Amid Dollar Scarcity

…As NASD OTC securities exchange index drops

The Nigerian currency, Naira depreciated across foreign exchange (FX) markets amidst foreign currency scarcity in the local economy.

The Nigerian naira was exchanged at N451.50 on Friday at the investors’ and exporters’ foreign exchange window due to higher demand for the dollar.

This translates to N5.12 depreciation in a week from N446.50, which is expected to impact payment status for record importation of goods and services by manufacturing and other recognised parties.

Though dollar inflows remained scarce, demand for foreign currency for import payments and other invincible demands by households and corporates continued to increase dramatically.

In the parallel market, the exchange rate dropped marginally to N745 from N743 amidst the release of new naira notes. This keeps FX transactions tight in the space as the deadline for transmitting the old naira notes to banks draws nearer.

FX trading record shows that market participants maintained bids between N442 and N455 at the Investors and Exporters segment while at the open market, bids ranged between N743 and N753.

A look at activities at the Interbank Foreign Exchange Forward Contracts market, the spot exchange rate remained unchained from the previous week as it closed the week at N445 from last week, Cowry Asset said in a market note.

Meanwhile, Nigeria’s external reserve was flat, printed at $39.96 billion after a persistent decline. At the official window, the volume of dollars transacted declined by 34.0% to $502.80 million as of Thursday, with trades consummated within the N426.00 – N468.14 band.

In the forwards market, the naira depreciated at the 1-month (-1.1% to N465.10), 3-month (-0.3% to N471.04), 6-month (-2.0% to N499.04), and 1-year (-2.9% to N536.84) contracts.

“For our outlook, we believe the FX liquidity issues will remain over the short-to-medium term in the absence of any positive signal that denotes an improvement in FX supply relative to the pre-pandemic levels”, Cordros Capital said in a report.

Meanwhile, the NASD over-the-counter (OTC) securities exchange index drops following price decline in Friesland Campina Wamco Nigeria Plc, UBN Properties Company and Niger Delta Exploration and Production Company whose share plunged significantly, trading data shows.

According to a market report, the NASD OTC securities exchange index tracked lower over negative movement, and return decreased by 0.28 per cent to close the week at 708.32 points against 710.30 brought forward.

The market has been trading in red amidst uncertainties in the local economy. Surprisingly, investors are taking large bets on companies listed in the Nigerian Exchange. Unlike NASD over the counter market, there has been a heavy rally in the stock market.

In the just concluded week, investors lose N2.61 billion due to price depreciation in active traded unlisted companies’ shares. Then, the OTC market capitalisation printed lower at ₦930.74 billion compared to N933.35 billion in the past week due to negative movement in prices.

There was a 23.58 per cent decrease in the total value traded during the week, according to a market report. The NASD Investors traded a total of ₦32,058,720.60 in value compared to N41, 951,586.51 in the previous week.

Total trade activity for the year is valued at ₦27,625,740,844.11 while the total volume traded during was 10,402,772 units compared to 1,397,331 units in the previous week. This translates to a 644.47 per cent increase in trade volume week on week while the total volume traded for the year is 3,807,570,306 units.