Naira Appreciates as FX Reserve Halts 16 Weeks Decline
In what appears as a benchmark trading point for the local currency, Naira was exchanged at N416 to a dollar in the official foreign exchange (FX) window on Friday, the period that marks an end to sixteen consecutive weekly drops in external reserve.
It could be observed that naira has not been able to break N416 since the local currency recovered from the Central Bank of Nigeria (CBN) devaluation that lifted the exchange rate to N430 at the Investors and Exporters FX window late in 2021.
Still, dollar inflow into the country has been minimal, though Bonny Light breaks a 7-Year high when it traded at N102 per barrel in the aftermath of Russia’s invasion of Ukraine, the level seen in 2014. But contained output level associated with a weak investment in oil infrastructure continues to limit dollar inflow from oil sales.
Nigeria’s output is 400,000 barrels per day behind the Organisation of Petroleum Exporting Countries quota, and 2022 budget estimates, though the oil group said in its monthly report there was a moderate recovery early in 2022.
At the parallel market, there was moderate pressure, albeit persistent as naira shed value, nearing N583 per dollar. Outlook for further devaluation of the local currency is still on the table, according to currencies traders’ notes.
Demand for the Invisibles, including other household-related imports has been strong as countries are lifting lockdowns while economic activities heading strongly to the pre-pandemic era.
MarketForces Africa reported that Naira opens the week at N416.75 to a dollar at the National Autonomous Foreign Exchange Fixing (NAFEX) rate market, thus gaining 75 kobo.
After a four month straight decline, Nigeria’s FX reserves closed higher by $40.68 million this week to $39.84 billion, Cordros Capital said in a commentary note citing data from the Central Bank of Nigeria.
Market data tracked from FMDQ Exchange shows that the Naira exchange rate fell -Naira appreciated- by 0.18% to close at N416.00 at the Investors and Exporters FX Window.
At the Investors and Exporters FX window, total turnover or volume of dollars transacted inched higher by 1.9% to $507 million from $497.8 million, according to a note by Afrinvest Limited.
In its report, Cordros Capital said trades were consummated by market participants within the N406.00 – 453.12 per dollar band.
At the parallel market, the Nigerian local currency depreciated against the greenback by 1.09% to close at N582.30. At the Interbank Foreign Exchange market, the exchange rate closed flat at N430.00 amid CBN’s weekly injections of $210 million.
Of the sum injected as part of FX markets intervention, $100 million was allocated to Wholesale Secondary Market Intervention Sales (SMIS), $55 million was allocated to Small and Medium Scale Enterprises and $55 million was sold for Invisibles.
Meanwhile, the exchange rate was pressured -Naira lost- for all the foreign exchange forward contracts, according to traders’ notes.
Specifically, 1 month, 2 months, 3 months, 6 months and 12 months contracts rose by 0.04%, 0.10%, 0.22%, 0.35% and 1.63% to close at N418.51, N421.78, N425.07, N434.96 and N455.35 respectively.
At the FMDQ Securities Exchange foreign exchange futures contract market, the total value of open contracts declined 10.3% week on week to $4.4 billion, traders at Afrivest said in a note.
Cowry Asset analysts are expecting Naira to depreciate against the dollar next week despite the high crude oil prices at the international market, amid declining external reserves. #Naira Appreciates as FX Reserve Halts 16 Weeks Decline
