Key Points

• FX shortage weakens naira exchange rate.

• Dollar inflows remain thin across markets.

• CBN support steadies naira exchange rate.

The naira lost value in official trading because there weren’t enough dollars to meet the growing demand on the foreign exchange market.

The naira dropped to N1,456 per dollar on the Nigerian Foreign Exchange Market because there weren’t many dollars coming in and international payment obligations were rising.

Trading conditions showed that supply problems were still going on, as exporters, non-bank corporations, and foreign portfolio investors only brought in a small amount of foreign currency during the session.

People in the market said that the lack of immediate action from the Central Bank of Nigeria meant that demand was not being controlled, which put more pressure on the naira to lose value. Official numbers showed that the naira’s spot rate went down because demand was higher than supply in the market.

Naira exchange rate drops because of a lack of FX

AIICO Capital Ltd. says that the NFEM rate fell by N4.38 per dollar to close at N1,456.20. During the session, transactions were recorded at between N1,454 and N1,457 per dollar, showing that liquidity was tight.

The Naira exchange rate outlook stays the same

Even though there is pressure in the short term, analysts think the naira exchange rate will stabilise by the end of the year, with N1,500 per dollar being the worst-case scenario. Expectations depend on the central bank continuing to intervene in the foreign exchange market and support policies.

The CBN has said it will keep supporting the currency until 2025, which will help keep things stable as external reserves grow. Gross reserves went up to $45.47 billion, which is an 11.24 percent increase from the beginning of the year. Daily increases were small.

Global markets send out mixed signals

In other news, global oil prices fell below $60 a barrel, the lowest level since May. This was due to hopes that a peace deal between Russia and Ukraine would lead to fewer sanctions. Brent crude oil dropped 2.49 percent to $59.05, and U.S. West Texas Intermediate oil dropped 2.26 percent to $55.39.

On the other hand, gold went up a little after U.S. jobs data showed a rise in unemployment. This made bets on Federal Reserve rate cuts stronger and the dollar index weaker. AIICO Capital analysts said that the markets are still cautious to bearish, and that geopolitical risks are still affecting oil prices.