Naira weakens to ₦1,361.84/$ despite record FX turnover

Nigeria’s naira weakened against the United States dollar last week despite record foreign exchange turnover of $1.01bn in the interbank market, as the Central Bank of Nigeria stepped up dollar sales to meet demand.

The naira closed at ₦1,361.84 to the dollar on October 23, its weakest official exchange rate since August, having lost about ₦29.60 during the week, according to the October 26 edition of the Macrostrat Weekly Economic Update.

The depreciation occurred despite the country’s gross external reserves rising to $55.16bn, highlighting continued pressure in the foreign exchange market despite improved reserve buffers.

The report also put the parallel market exchange rate at ₦1,375 to the dollar, indicating a relatively narrow gap between the official and parallel markets.

It said the Central Bank had increased dollar sales amid sustained demand, with developments in the coming week expected to determine whether the naira would stabilise or face further pressure.

The report noted that broad money supply rose by 5.4 per cent to ₦146.6tn in September, while overnight interest rates remained around 20 per cent despite the CBN’s 350-basis-point reduction in the monetary policy rate to 23 per cent.

Yields on Open Market Operations instruments also rose at the October 22 auction, where the apex bank sold ₦2.63tn worth of securities against an offer of ₦2tn, reflecting sustained demand for the instruments.

On the Nigerian Exchange, the All-Share Index closed at 247,222.27 points on October 23, gaining 0.92 per cent on the day and 58.87 per cent year-to-date.

However, market breadth remained weak, with 25 stocks declining against 23 gainers. The market had also recorded a weekly decline of ₦103.6bn earlier in the period.

In the corporate sector, First HoldCo reported a 61 per cent increase in nine-month profit before tax to ₦911bn, while Unilever Nigeria’s profit rose by 20 per cent to ₦26.4bn.

The report also highlighted developments in the oil and gas sector, noting that domestic petrol supply fell by 23 per cent in September as Dangote Refinery’s petrol exports increased by 59 per cent.

Dangote Refinery’s output rose by 13 per cent to 47.22 million litres daily, while diesel receipts declined by 40 per cent.

Looking ahead, the report said the naira’s performance would depend largely on dollar demand, the CBN’s intervention in the foreign exchange market and the ability of external reserves to cushion exchange-rate volatility.

It added that crude oil prices above $116 per barrel could support Nigeria’s export earnings and foreign reserves but also increase domestic fuel-price pressures when the Nigerian National Petroleum Company Limited’s petrol discount expires on October 31.

Other developments expected to influence the domestic market include the October 27 closing date for the Dangote Cement initial public offering, the House of Representatives’ engagement with telecommunications executives on October 28, and the release of further corporate earnings.

Globally, rising oil prices and key monetary policy decisions by the United States Federal Reserve, European Central Bank and Bank of Japan are expected to shape financial market movements during the week.

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