NAIRA is expected to trade at N439.13/$ about a year, data from FMQB OTC foreign exchange (FX) Futures suggested.
According to the data analyzed by Prime Business Africa, contracts valued at $19.37 million are open for July 27, 2022, to be settled at an estimated N439.13/$.
OTC FX Futures are non-deliverable forwards contracts with parties that agree to an exchange rate for a predetermined date in the future. They, however, do not have an obligation to deliver the underlying dollar on the maturity settlement date.
Upon maturity, both parties are assumed to have transacted at the spot FX market rate.
Created in 2016 by the Central Bank of Nigeria (CBN) in partnership with FMDQ, OTC FX Futures contracts are cash-settled domestic local currency while the differential between the contract rate and the Nigerian Autonomous Foreign Exchange (NAFEX) on the maturity day determines the settlement amount.
Still, the future rates are an important clue revealing market perception about the expected value of the naira. The rates give an idea of market perception, up to five years.
Data made available today put the June 24, 2026 value of the naira at N613.76/$, suggesting that the market expects the naira to surpass N600/$ in five years. However, no contract is executed for the specific future date. The perception of the value of the naira, measured by the future estimation, has improved compared to the previous months.
The future rate is way above the N410/$ benchmark contained in the 2022-2024 Medium Term Expenditure Framework and Fiscal Stability Paper (MTEF/FSP).
Prime Business Africa reports that next year’s future rate opens and closes with N429.30/$ and N456.38/$ respectively. The opening and closing rates for 2023 are N459.70/$ and N497.29/$ just as those of 2024, the terminal year of the framework, are N500.80/$ and N541.16/$.
Despite the improved perception, the domestic currency traded slightly lower on the spot market on Thursday, closing at N411.20/$ as against N411.17/$ it opened. With a range of N400/$ and N412.5/$, the rate maintained tight trading, unlike the usual wide swings.
Today also, the volume of the transaction was $123.7 million, which is a far cry from the average daily supply of $143.3 million and $132.6 million recorded in June and May respectively.
At the parallel market, the naira has remained weak. It has traded at N505/$ at the market since last week. On some online exchange portals, Nigerians buy dollars for N509/$ as the uncertainty about the future of the currency continues.
Naira has been on a downward trend since the Central Bank adopted the NAFEX rate as the default rate for official transactions some weeks ago, Prime Business Africa, observes.