Political Activities, Low FX Earnings to Weaken Naira This Week
By Aduragbemi Omiyale
The value of the Nigerian Naira will further remain low against the American Dollar at the Investors and Exporters (I&E) segment of the foreign exchange (forex) market this week.
Also, the Naira will struggle against the greenback at the black market in the week as politicians prepare for the 2023 general elections, according to analysts at Cowry Assets.
Already, those who intend to govern the nation next year have started to buy their nomination forms both in the ruling All Progressives Congress (APC) and the opposition Peoples Democratic Party (PDP).
The presidential form in the APC goes for N100 million, while the PDP is selling for N45 million. The other parties have also started selling but the attention is always on the two major political organisations in the country as they are likely to produce the next President.
Those who have bought the forms are talking to delegates and in most cases, the inducement is in foreign currencies and this will put pressure on the local currency as the scarce FX in circulation would be mopped up by politicians who want to buy their way into power.
With Nigeria earning less from the sale of crude oil despite prices on the high side, the domestic currency will suffer from it.
According to researchers at Cowry Assets, “we expect some level of pressure on the Naira against USD due to anticipated pressure on foreign exchange amid electioneering activity coupled with weak petrodollar earnings.”
Last week, the Naira depreciated against the Dollar by 0.23 per cent week-on-week to N418.50/$1 at the investors’ window as Bonny light price rose to $107.09 per barrel.
However, Naira depreciated at the parallel market by 19.00 per cent to N590.00/$ and at the interbank segment, it closed flat at N430.00/$1 amid the weekly injection of $210 million into the fore market by the Central Bank of Nigeria (CBN).
A breakdown revealed that the apex bank allotted $100 million to Wholesale Secondary Market Intervention Sales (SMIS), $55 million to the Small and Medium Scale Enterprises (SMEs) and $55 million to invisibles to cater for school fees, medical and others.
Meanwhile, the Naira/USD exchange rate went in mixed directions across the FX forward contracts as the 2-month, 3-month and 12-month contracts gained 0.05 per cent, 0.05 per cent and 0.18 per cent to close at N420.92/$1, N423.80/$1 and N448.02/$1 respectively.
However, the one-month and 6-month contracts lost 00.11 per cent and 0.01 per cent to close at N418.46/$1 and N432.66/$1 respectively.