By Modupe Gbadeyanka
There are strong indications that the Naira will appreciate at the foreign exchange (forex) market this week, analysts at Cowry Asset and Business Post have predicted.
According to Business Post analysts, the domestic currency will record a marginal gain against the Dollar in the four-day trading week despite the expected decline in the nation’s external reserves.
As at last Wednesday, data sourced from the Central Bank of Nigeria (CBN) by Business Post showed that the reserves were at $42.1 billion from $42.2 billion in the previous day.
From our analysis, the local currency will get an unusual strength from the easing of pressure from the demand of FX from investors as well as exporters at their market segment.
In the past few days, Business Post has observed lower demand for the foreign currency at the I&E window as shown by the FMDQ, a platform which gives update on the daily turnover at the market.
Last Tuesday, the Naira depreciated after market demand for FX rose by 37 percent to trade at N362.29/$, and the next day, a 35.8 percent decline in the turnover left the local currency flat at N362.29/$.
On Thursday, the Naira lost 29 kobo to trade at N362.58/$ despite a marginal 9.2 percent drop in demand for FX at the I$E segment. But on Friday, the Naira appreciated to N362.02/$1 after gaining 56 kobo on 59.4 percent decline in the market turnover for the third straight session.
It was observed that the decrease in the turnover is attributed to the inflow of forex into the country from foreign portfolio investors, who are finding Nigerian markets attractive again especially with the low prices stocks are being traded at the Nigerian Stock Exchange (NSE) as well as rising yields of bonds and treasury bills.
This point was buttressed by analysts at Cowry Asset, who said, “In the new week, we expect appreciation of the Naira against the USD across the market segments as seemingly renewed interest by foreign portfolio investors in local financial assets is further felt amid rate cut in US.”
Last week, Naira appreciated at the I&E to close at N362.02/$, but traded flat at the Bureau De Change as well as the parallel (black) markets, closing at N358.00/$ and N360.00/$ respectively.
Also, at the interbank segment, the domestic currency depreciated to N358.13/$ despite the weekly injections of $210 million by the CBN into the FX market via the Secondary Market Intervention Sales (SMIS).
In the intervention, the apex bank allocated $100 million to Wholesale SMIS, $55 million to Small and Medium Scale Enterprises and another $55 million for invisibles.
Meanwhile, the Naira/USD exchange rate fell (i.e. Naira appreciated) for most of the foreign exchange forward contracts – one month, 2 months, 3 months, 6 months and 12 months rates fell by 0.11 percent, 0.09 percent, 0.03 percent, 0.26 percent and 0.42 percent to close at N365.31/$, N368.73/$, N372.28/$, N382.97/$ and N409.45/$ respectively. However, spot rate was flattish at N306.95/$.
Dipo Olowookere 
Adedapo Adesanya