FX Shortfall Weighs on Naira, Spot Rate Falls to N1437/$

ABUJA: A sizeable shortfall in US dollar supply at the Nigerian Foreign Exchange Market (NFEM) weighed on the naira exchange rate on Monday.

 The Central Bank of Nigeria (CBN) FX update revealed that the Naira weakened by 5 basis points, or ₦0.72, to close at ₦1,437.29/$, having traded within a range of ₦1,442.00/$ and ₦1,435.0/$ during the session.

The decline was driven by insufficient supply from foreign portfolio investors (FPIs) and local participants to cover for the demand, according to investment firm AIICO Capital Limited.

Naira came under pressures due to weak US dollar liquidity in the official currency market. The slowdown in FX flows forced the CBN into action with $50 million sold to boost liquidity last week.

FX inflows fell last week by about 14% to $899 million, according to Coronation Merchant Bank research subsidiary, from $1.04 billion the previous week.

The market anticipates that the naira will trade stable as the CBN maintains stance to support the local currency, a move strengthened by growing external reserves.

The country’s foreign reserves surged to $43.348 billion amidst oil prices fluctuation.  Global oil prices swung between gains and losses on Monday as analysts stuck to predictions that rising supply will outweigh demand in the months ahead.

Assets prices rebound as hopes of progress in ending a U.S. government shutdown raised investors’ risk appetite.  Brent crude rose by 37 cents, or 0.58%, to $64.00 per barrel, while U.S. West Texas Intermediate (WTI) rose by 33 cents, or 0.55%, to $60.08.

Gold prices climbed more than 2% on Monday to hit a two-week high as soft economic data out of the United States reinforced expectations that the Federal Reserve will cut interest rates, lifting demand for the non-yielding asset.

Spot gold spiked 2.83% to $4,113.09/oz, while U.S. gold futures increased by 2.76% to $4,120.65/oz. Analysts expect commodities to continue gaining momentum tomorrow, as oil benefits from improved risk appetite amid hopes the U.S. government shutdown will end, and gold is buoyed by softer economic data that lifts expectations of a rate cut. Oando Sinks Below N500bn Amidst Petrol Business Threat

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