Central Bank of Nigeria

FX Market: Naira depreciates on rising cases of COVID-19

Exchange rates depreciated by ₦30 week on week (w/w) at the parallel market amid rising cases of COVID-19, poor inflow into external reserves.

Naira traded at ₦410 to a dollar at parallel market at the weekend.

COVID-19 remains a threat global economy, and Nigeria is well hit as government revenues expectation has been estimated to drop.

Unfortunately, there is less to be desire as per balance in the excess crude accounts (ECA) that was designed to support oil shock.

Last Friday, the CBN released a circular which indicates a gradual transition to a uniform exchange rate.

Afrinvest noted that following the adjustment, the exchange rate between IMTOs & banks, banks & CBN, CBN & BDCs and BDCs & end-users were set at ₦376.00, ₦377.00, ₦378.00 and ₦380.00 respectively.

Meanwhile, oil prices continue its downtrend as it settled at $27.59/bbl. while external reserves further moderated 0.1% to $35.7 billion from $36.0 billion last week.

With the pandemic affecting oil prices and investor sentiment, the prospect for accretion in reserves remains weak, analysts at Afrinvest held.

The CBN spot rate remained unchanged at ₦361.00/$1.00 from the prior week. At the parallel market, rates depreciated ₦30.00 w/w to settle at ₦410.00/$1.00.

Read: https://dmarketforces.com/cbn-launch-5-year-contracts-to-boost-fx-inflow-as-average-t-bill-yields-drop/

Also, at the Investors’ & Exporters’ (I&E) Window, the NAFEX rate opened at ₦380.55/$1.00 and closed at ₦381.50/ $1.00 on Friday, depreciating ₦9.50 kobo w/w from ₦372.00/$1.00.

Activity level in I&E Window declined 72.0% to $827.3 million from $3.0 billion recorded in the previous week.

The decision to stop FX sales to the BDC segment would widen the premium between parallel market and official spot rates, Afrinvest remarked.

At the FMDQ Securities Exchange (SE) FX Futures Contract Market, total value of open contracts of the Naira settled at $14.0 billion.

This represents an increase of $430.7 million from $13.5 billion in the prior week despite the maturity of the MAR 2020 instrument.

The APR 2021 instrument (contract price: ₦386.46) received the most buying interest in the week with additional subscription of $49.3m which took total value to $835.4 million.

On the other hand, the MAY 2020 instrument (contract price: ₦381.46) was the least subscribed, with an additional subscription of $70.7 million for a total value of $1.9 billion.

Next week, we expect rates to trade within the new specified band across different segments, Afrinvest forecast.

FX Market: Naira depreciates on rising cases of COVID-19

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