Nigeria’s local currency, the naira, strengthened by 9.64 percent, despite a decline in dollar liquidity at the official market on Monday.
At the close of trading on Monday, the dollar was quoted at N837.77, stronger than N927.19 quoted on Friday at the Autonomous Foreign Exchange Market (NAFEM), data from the FMDQ indicated.
The naira appreciation followed a moderation in dollar demand at the official foreign exchange (FX) market.
Willing buyers and willing sellers quoted dollars at a bid rate of N1,021, stronger than N1,160/$1 offered on Friday as the higher bid rate on the spot trading. The lower bid rate remained steady at N701 per dollar on the spot.
Dollar supply decreased on Monday as the daily foreign exchange market turnover dropped by 32.87 percent to $73.93 million from $110.14 million recorded on Friday.
In its equity research note, FSDH research acknowledged the recent pickup in activities at the NAFEM following increasingly attractive interest rates in the money market, which could entice trade investors to bring investments into Nigeria.
For context, post-FX reforms, the average NAFEM turnover is $114.8mn, up 5.2 percent from the pre-FX reform average. In addition, the report stated that the average NAFEM turnover for November was $140.9mn, showing some form of resurgence.
However, it remains below pre-Covid peak levels of about $250mn, which is the level that indicates renewed foreign investor interest in Nigeria’s capital market instruments.
“As a result, while the November resurgence was impressive, we deem it inadequate to sustain prolonged foreign investor interest in Nigerian equities. Ultimately, stable oil prices around $60 – $70/bbl. And prolonged crude oil production at >1.7mbpd will be needed to generate adequate FX inflows and strengthen external reserves, which would then attract much-needed Foreign Portfolio Investment inflows,” analysts at FSDH research said.
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