Naira Sheds Value at Investors Window as Turnover Declines
Nigeria’s local currency, Naira, sheds value in the Investors and Exporters window as total turnover at the space bumps 22.3% this week amidst declining foreign reserves.
Following a recent meeting with the policy authority in Nigeria, the International Monetary Fund flags inflationary pressure and joblessness, though multilateral financier lauds move to unified exchange rate but maintained the position that the central bank (CBN) has to do more.
In the investors and exporters window, the exchange rate depreciated as dollar supply plunged despite the fact that CBN participation in the market is below the pre-pandemic level.
Though prices of oil have been stable, Nigeria’s external reserves sustained a decline, dipping US$182.93 million this week to US$33.82 billion – the lowest since October 2017.
Meanwhile, the naira depreciated by 0.1% to N411.00 to a dollar at the Investors and Exporters Window (IEW) but appreciated by 0.8% to N498.0 at the parallel market.
At the IEW, total turnover decreased by 22.3% this week to US$490.88 million, with trades consummated within the N400.00 – 412.00 band.
In the forwards market, analysts at Cordros Capital said the rate appreciated across the 1-month (+0.4% to N411.73, 3-month (+0.9% to N415.68, 6-month (+2.0% to N419.95 and 1-year (+4.2% to N428.65) contracts.
Exchange rate closed flat at N380.69 to a dollar at the Interbank Foreign Exchange market amid weekly injections of USD210 million by CBN into the forex market.
CBN dollar supply at the space was split into USD100 million for Wholesale Secondary Market Intervention Sales (SMIS), USD55 million was allocated to Small and Medium Scale Enterprises and USD55 million was sold for invisibles.
Meanwhile, the spot rate remained flat at N379.00 to a dollar. The apex bank promised to increase FX liquidity in Nigerian banks. This is expected to have positive impact on FX rate especially following strong arbitrage in the black market.
Analysts at Cordros Capital said they expects improved liquidity in the IEW over the medium term, given expectation of increased oil inflows in line with the rise in crude oil prices, and inflows from foreign currency borrowings.
Accordingly, analysts said they expect the naira to remain relatively range-bound at N410.00– N415.00 in the investors’ window.
However, WSTC analysts think that pressures from FX supply challenges would persistently drive increases in the general price levels unless effective policies are put in place by the government.
Naira Sheds Value at Investors Window as Turnover Declines
