Naira Records Moderate Gain as Foreign Reserves Rise for 6-Week
The Nigerian local currency, naira, record moderate recovery this week at the investors and exporters foreign exchange window from where it has witnessed a heavy demand pressure during the week.
Despite increased inflow into the external reserves in recent times, the naira has remained under pressure as FX spreads between the official rate and parallel market rates expand.
This is creating speculative opportunity in the foreign exchange market but analysts believe that introduction of eNaira would reduce arbitrage opportunity seen in the FX space.
Arbitrage opportunity worsen after the Central Bank cutoff bureau de change from its weekly dollar supply, the decision that was followed by official de-recognition of the channel by the monetary policy committee of the apex bank in September 2021
Closed at N413.38 at the Investors and Exporters window, according to data from the FMDQ platform, the naira had fallen to N414.85 to a dollar within during the week amidst the massive unofficial devaluation in the black market.
The accretion to Nigeria’s FX reserves was sustained for the sixth consecutive week, as the gross reserve position closed higher by US$304.67 million week on week to US$36.41 billion.
Also, Nigeria is expecting inflow from Eurobond raise in the coming days apart from the International Monetary Fund special drawing unit window opened after IMF approved $650 billion for post-lockdowns spending for countries.
In the parallel market, the naira was faced with pressure again as the local currency depreciated by 0.4% week on week to N574.00 for a dollar on Friday.
At the Investors and Exporters window, analysts at Cordros Capital said in a report that total turnover decreased by 19.9% from the beginning of the week to US$711.30 million.
The report said trades were consummated within the N404.00 – 448.53 per dollar band.
In the Forwards market, the rates on the 1-month (+0.1% to N415.06), 3-month (+0.5% to N420.22), 6-month (+0.8% to N428.06), and 1-year (+1.5% to N443.78) contracts reflected the appreciations of the naira to the greenback.
“We expect improved liquidity in the Investors window over the medium term, given an expectation of increased oil receipts in line with the rise in crude oil prices and inflows from foreign currency borrowings and IMF SDR
Accordingly, analysts said they expect the naira to remain relatively range-bound N410.00 – N415.00 at the investors and exporters window next week.
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Naira Records Moderate Gain as Foreign Reserves Rise for 6-Week
