Beginning from the start of the week and continuing through Thursday, the Central Bank of Nigeria (CBN) intensified its interventions in the FX market. This initiative is part of an ongoing effort that commenced the previous week to achieve the targeted exchange rate by year-end.
In the prior week, the CBN intervened three times in the FX market, selling approximately $125 million to authorized dealer banks at reduced rates. This influx of US dollar sales to banks resulted in heightened market activity and improved liquidity throughout the week.
As market conditions remained dynamic, exchange rates fluctuated between N1,510 and N1,565. AIICO Capital Limited noted that midweek trading showed significant stability, with rates narrowing to between N1,531.00 and N1,550.00. By the week's conclusion, the naira had depreciated slightly by 13 basis points week-on-week, closing at N1,542.00 per US dollar.
In the parallel market, the exchange rate fell sharply due to increased demand in the informal currency market for invisible payments. This pressure persisted despite recent guidelines permitting Bureau de Change operators to access $25,000 from local banks at the official rate, with a 1% cap on the FX spread.
The CBN continued its interventions for the fourth consecutive session, selling $46 million at rates ranging from N1,531 to N1,542. The Apex Bank supported the local currency throughout the week, except on Friday, bringing the total FX sales for the week to $197.7 million.
Nigeria's foreign reserves experienced an increase in US dollar inflows this week, with gross reserves rising by US$226.47 million to reach USD40.79 billion. The naira exhibited mixed performance in the forwards market across various contracts. Specifically, the naira rate for the 1-month contract saw a slight depreciation of 0.1%, settling at N1,581.39 per US dollar.
In contrast, the 3-month FX forward contract appreciated by 0.0%, reaching N1,638.84 per dollar, while the 6-month contract increased by 0.4% to N1,720.67. Additionally, the 1-year FX forward contract rose by 0.3%, now priced at N1,895.16. Meanwhile, oil prices remained relatively stable as markets evaluated Chinese demand alongside potential interest rate cuts from the U.S. Federal Reserve.
Brent crude was trading at approximately $72.94 per barrel, while WTI was around $69.46. Concurrently, gold prices continued their upward trend on the week's final day, supported by a weaker dollar and declining Treasury yields following U.S. economic reports, with gold valued at approximately $2,623.36 per ounce.