Sustained naira pressure on back of heightened socio-political risk
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Outlook for foreign exchange seem dim as analysts anticipate that the Naira will continue to experience pressure at all segments of the market this week against the backdrop of heightened socio-political risk and broader macroeconomic concerns.
According to Afrinvest report, a long list of macroeconomic and socio-political headwinds still pose a challenge to price stability. For instance, the impending increase in systemic liquidity during the upcoming elections, expected food challenges due to deteriorating socio-political challenges, expected maturity of AMCON’s N978.35bn bond and recent capital reversals by Foreign Portfolio Investors (FPIs) are likely factors that may determine price levels in the medium term.
The report noted that the Naira has lost approximately 2.0 percent within the last two month and poised to depreciate further; and considering the 13.0 percent contribution of imported goods to the index, the inflation index is bound to tick higher in coming months.
However, in a bid to calm the recent volatility of the Naira, the Central Bank of Nigeria (CBN) increased its bi-weekly intervention at the Primary market last week, as it sold US$700.0m compared to US$400.00 sold last week. The CBN sold US$350.0m on Monday at the marginal rate of 155.75/US$1.00 while it increased the marginal rate by 1kobo to N155.76/US$1.00 on Wednesday when it sold another US$350.0m.
At the interbank on Monday, the Naira appreciated 85kobo to close 163.85/US1.00 following the CBN’s RDAS auction and an undisclosed amount of Dollars sales by the NNPC. However, the forex market witnessed renewed pressure on Tuesday as the Naira weakened by a marginal 30kobo to 164.15/US$1.00. Despite the Dollar sales by Shell on Wednesday, the Naira sustained pressure, depreciating 45kobo to close N164.60/US$1.00. On Thursday, the Naira breached the N165.00/US$1.00 mark to close at its weakest position in eight months (N165.30/US$1.00).
Article Credit: Businessdayonline