Naira Skids as External Reserves Fall Below $36bn
Nigerian Naira loses weight across the foreign exchange (FX) markets as the monetary policy committee (MPC) of the Central bank of Nigeria (CBN) pushed the benchmark interest rate higher to 18%.
At the investors’ and exporters’ foreign exchange window (IEW), the Nigerian naira depreciated by 0.1% to the United States (US) dollar as demand for FX increased above supply.
The CBN reported on its website today that external reserves declined 2.76%, falling below $36 billion following its sustained FX auction sales driven by its market interventionist stance.
The CBN sells foreign currencies to local banks via auction to support eligible demands. In the parallel market, the dollar was sold at N752 after Nigerian banks told customers about a 50% cut in business and personal travelling allowance.
Tolu Osinibi, Managing Director, FSDH Capital said the CBN show allows some depreciation of the local currency to allow real FX inflow into Nigeria. He noted that the CBN has been delaying the settlement of its FX sales at the retail auctions.
Therefore, the gap between the official and parallel market rate printed at N290; thus, creates an opportunity for currency speculators to make quick bucks. Last week, the Nigerian Autonomous Foreign Exchange Fixing (NAFEX) rate traded within the range of N445.9-462.5 per greenback but closed at N461.8 on Friday.
Meanwhile, the non-deliverable forward rate worsened above N600 as the CBN FX backlog continues to rise. In the retail secondary market intervention sales (SMIS) market, the FX spot rate remained unchanged to close at N462 on Friday.
Data gathered from the FMDQ Exchange platform showed that the volume of dollars transacted at the investors’ window increased by 6.4% above previous week to USD87.8 million.
Turning to the Chinese Yuan (CNY), according to data from the CBN, the Naira depreciated by -0.7% w/w to close at N66.7/CNY. # Naira Skids as External Reserves Fall Below $36bn
