The naira recorded a mixed performance in the past week, as it appreciated 1.12 per cent at the official market and weakened 0.49 per cent at the parallel market.
At the official market, the naira closed the week’s trading at 1,457.95/$ from 1,475.35/$ in the previous week, supported by limited interventions from the Central Bank of Nigeria and inflows from Foreign Portfolio Investors.
At the parallel market, the naira weakened marginally by 0.49 per cent to 1,491.25/$1, which analysts believed was a reflection of persistent FX demand pressures and cautious investor sentiment.
Meanwhile, Nigeria’s external reserves continued its steady rise as it stood at $42.87bn on Wednesday, which is about $170m appreciation from the previous Friday’s figure.
The improvement was supported by steady oil receipts, stronger non-oil inflows, and a sustained trade surplus, all of which continued to underpin the CBN’s FX stability efforts.
The analysts at Cowry Asset Management Limited in their weekly report projected a positive outlook for the naira in the coming week, saying, “In the coming week, we expect the naira to experience mild pressure in the near term as FX demand persists amid limited market liquidity. However, steady oil receipts and a gradual build-up in external reserves could offer some support to the local currency. We continue to monitor CBN interventions and global oil price movements, which are likely to shape sentiment and exchange rate direction in the coming week.”
The experts at Afrinvest expressed similar sentiments about the outlook for the naira in the coming week.
“In the week ahead, we expect the naira to trade within similar bands across FX segments, barring any short-term market disruptions,” the Afrinvest Research team stated.
In the long run, the naira is expected to benefit from the decision of the Central Bank of Nigeria to revisit the issue of currency swap. At the just-concluded IMF/World Bank Annual Meetings in Washington, DC, CBN Governor, Olayemi Cardoso, explained that while the country had previously experimented with local currency trade agreements, the initiative did not yield the desired results.
“We have had an experiment with that (switching to national currencies in bilateral trade). And to be frank, it did not work out very well for us. That is not to say that we are not interested in doing this. We are. And we are really at an elementary stage of putting up a framework, now that our currency is more competitive, to be able to ensure that it is a win-win for everybody,” he said.
Commending the move, Comercio Partners, in its latest investment email, Traders Voice, titled, ‘The Sequel Nobody Asked For’, said, “The new naira–yuan swap deal worth N3.28tn aims to improve trade settlements and reduce reliance on the dollar. Cardoso admitted previous attempts fizzled due to weak logistics and poor awareness, but says recent FX reforms have made the naira more competitive. If this one sticks, it could strengthen trade ties and stabilise reserves, third time’s the charm, hopefully.”
