The naira got a boost at the official window in the past week to 1,547/$ from 1,549/$, influenced by intervention from the Central Bank of Nigeria, which injected dollars into the market to ease corporate demand pressures.
Analysts say the development is due to the resilience of the naira to foreign exchange inflows from foreign portfolio investors. Cordros Capital Limited, in an investor’s note, revealed that FPIs brought in dollars to participate in the Open Market Operation auction by the CBN.
The CBN conducted an OMO auction driven by its continuous effort to absorb excess system liquidity. The Central Bank offered N600bn across the 155-day and 204-day tenors, attracting strong investor interest with total subscriptions reaching N1.14tn. Ultimately, the CBN allotted N1.07tn, with stop rates clearing at 24.20 per cent and 24.59 per cent, respectively.
The 0.13 per cent week-on-week appreciation in the naira is an extension of the gains that the currency has been making since the beginning of the month at the NFEM. However, in the black market, the naira weakened slightly to N1,585/$.
Also, analysts at Cowry Asset Management Limited projected that the naira would remain relatively stable in the coming week, supported by continued CBN interventions and improving foreign exchange inflows as reforms gain traction. Researchers at Cordros Capital Limited echoed similar sentiments, saying that it expects CBN to manage volatility through interventions when needed.
They, however, warned that the continued stability of the naira is threatened by persistent global pressures, now intensified by renewed tensions in the Middle East which has seen oil prices rise in the last three weeks, which is positive news for the Nigerian economy given its dependence on crude oil sales receipts.
As the naira strengthened, the foreign reserves declined further this week, data from the CBN website showed on Sunday, indicating a further decline to $37.71bn as of Thursday.
