Naira Remains Weak Across Exchange Market

The value of naira has continues to wobble across different markets even as analysts express worry that growing political activities will increase the pressure on the local currency.

The troubled naira lost about 70 kobo to the dollar during yesterday’s trading at the investors’ and exporters’ (I & E) foreign exchange window. The market opened at N414.05 but closed at N414.73/$.

Daily trading turnover stood at $127.68 million, which is lower than August’s daily average turnover. Analysts had called for an increase in the supply of FX at the official window to reduce to make a near-clearing trading platform.

Naira continues to face increasing pressure at the black market as illiquidity defies trading. Yesterday, naira was still pegged at about N570/$. Dealers said the pressure had reduced slightly but were worried that supply was yet to improve.

Some experts fear that rising political activities would increase the pressure on the naira. The Anambra Governorship Election is about a month away while intra-party activities are also gradually building up.

A professor of applied economics, Godwin Owoh, who has monitored the historical correlation between the value of naira and partisan politics, told Economic Confidential that the months ahead could be more uncertain for the forex market.

“Our political system is highly dollarised. If the naira is already facing this level of pressure, you can imagine what will happen in the next few months when politicians would have doubled up intra-party campaigns. This will begin to impact the market before the end of the year.

“Anambra election alone will put much pressure on the market. In the next few weeks, politicians will be sourcing dollars from the black market for all manners of ‘settlement’. These will leave the outlook of naira worse off,” Owoh said.

On the contrary, the rising external reserves and bullish oil prices are changing the negative sentiment about the future value of the naira. On Monday, the liquid portion of the country’s external reserve exceeded $36 billion for the first time year to date (YTD).

Since the last week of August, the reserves have been bullish, a clear departure of the gloomy figures that characterized the first half of the year. As the country expects to cash out of approved Eurobonds and other external loans the Federal Government planned to secure, analysts said the external sector could only get better.

On Tuesday, Brent topped $80 in a rally towards the pre-COVID market, suggesting that the country’s earnings from oil could improve in the coming months. This is expected to translate to better reserves, but under-production and subsidy continue to undermine the country’s earnings.