The naira depreciated against the US dollar at the Nigerian Foreign Exchange Market on Tuesday, driven by increased demand for foreign payments. As sharp FX interventions from the Central Bank of Nigeria slow, the local currency has experienced heightened volatility against the greenback, though Broadstreet analysts maintain a positive exchange rate outlook for the remainder of the year.
The Apex Bank defended the naira with $150m in April, representing an 83 per cent decrease from the liquidity injected into the official window in March. The authority has reportedly taken a back seat to protect the nation’s gross external reserves, which have declined by approximately $1bn to $48.34bn.
In the official window on Tuesday, the naira settled at N1,366.56/$, down from N1,365.25/$ the previous day, according to the CBN’s daily FX publication.
Further details from the CBN revealed a sharp increase in interbank foreign exchange activity, which bolstered liquidity levels in the official window despite reduced direct intervention. Interbank FX turnover surged to $71.59m across 99 deals, up from $59.93m reported in the previous session.
While domestic reserves continue their downward trend, global oil prices also retreated on Tuesday. The decline followed a United States operation aimed at reopening the Strait of Hormuz to shipping traffic, though sporadic exchanges of fire between U.S. and Iranian forces slowed the price drop.
Brent crude futures fell by $1.38, or 1.2 per cent, to $113.06 per barrel, after a nearly six per cent surge on Monday. Similarly, U.S. West Texas Intermediate crude declined by $2.21, or 2.1 per cent, to settle at $104.26 per barrel.
The CBN Governor Olayemi Cardoso said, “The foreign exchange system that used to operate in those days is very different from what it is now. “Then, you had the CBN that was primarily the only one determining that market. That is different now. It is market-driven. There is more liquidity in the market. There is confidence. Investors come in and go out as they like.”