The Nigerian Naira has appreciated against the US dollar in the Investors and Exporters (I&E) window of the foreign exchange market, despite a decline in turnover.
This comes as the naira appreciated by 50 kobo to N463 per dollar on April 28th, compared to N463.5 per dollar traded on April 3rd, 2023.
According to Investors King analysis of monthly transactions in the I&E window as published by FMDQ, turnover fell by 46% month-on-month to $1.4 billion in April 2023 from $2.6 billion in March. However, this sharp decline in turnover sharply contradicts the 52.9% increase recorded in March from $1.7 billion in February.
Weekly analysis of transactions in April showed that turnover stood at $411.73 million in the first week and fell by 28% to $293.25 million in the second week. In the third week, turnover rose by 27% to $375.02 million, and in the fourth week, it fell by 14% to $320.47 million.
Despite the decline in turnover, the naira appreciated by N7 in the parallel market during the review period. Investors King gathered from black market traders that the exchange rate at that section of forex fell to N740 per dollar on April 28th from N747 per dollar on April 3rd, 2023.
However, analysts project a possible depreciation of the naira in the coming months due to the depletion of the nation’s foreign reserve coupled with the CBN’s hike in inflation rate to 17.5% in January.
According to analysts at Financial Derivatives Company (FDC), the constant depletion of the external reserves is a result of the CBN’s increased supply of forex to support the naira.
FDC further stated that improved measures to fight against oil theft and other insecurity issues in the oil sector are expected to increase external reserves, but high subsidy payments are likely to create a decline in oil earnings. The continuous depletion of the external reserves is likely to limit the CBN’s ability to support the naira, which could lead to further depreciation of the currency.
In light of this, the Nigerian government has been urged to strengthen external reserves to stabilize the naira and prevent a possible depreciation in the coming months.