Analysts Anticipate Continued Pressure on Naira Across FX Segments as CBN Faces Supply Constraints

Analysts in the nation’s financial service sector has predicted that the naira will continue to encounter sustained pressure due to the Central Bank of Nigeria’s (CBN) constrained capacity to substantially enhance supply.

The naira recorded a 1.2 per cent week-on-week gain against the dollar last week, settling at N891.90/$1. However, the overall activity level experienced a 3.5 per cent week-on-week decline, culminating in a weekly turnover of $488.2 million.

Contrastingly, the parallel market depicted a different narrative as the Naira weakened against the greenback, closing at N1,420.00/$1.00 at the end of trading.

Looking ahead, analysts at Afrinvest said they anticipate the naira to confront on going pressure across FX segments.

“This outlook is attributed to the CBN’s limited capacity to substantially enhance supply, introducing an element of uncertainty and volatility to the foreign exchange landscape. Market participants brace themselves for potential challenges and shifts in the coming week as the intricate dynamics of the FX market continue to unfold.

“Across the FX market, the performance of the Naira diverged with mild recovery in the official market. Precisely, the Naira gained 1.2 per cent w/w against the USD to settle at N891.90/$1. Meanwhile, activity level fell 3.5 pr cent w/w with weekly turnover closing at $488.2m.

“At the parallel market, the Naira shed 4.6 per cent w/w against the greenback at N1,405/$1 at the close of trading. Next week, we expect the naira to remain pressured across FX segments due to CBN’s constrained capacity to significantly boost supply, ” they stated:

They stated: “System liquidity plunged 66.6 per cent w/w but remained robust at N210.5bn despite the Treasury bills (T-bills) auction conducted by the CBN. As such, OPR and OVN rate contracted 4.5ppts and 4.4ppts to close at 17.6 per cent and 18.8 per cent respectively.”