Market Devalues Naira to N418.50 as FX Reserve Drops

Market Devalues Naira to N418.50 as FX Reserve Drops

Demand pressures impacted the value of the Nigerian naira in the foreign exchange markets in the just concluded week, according to trading data from the FMDQ Exchange platform which saw a decline in the local currency purchasing power.

The Nigerian local currency, the naira, falls by 0.23% at the official window to N418.50 against the United States dollar as the nation’s external reserve bumped in the just concluded week.

Naira has continued to struggle to find its true value as the Central Bank of Nigeria (CBN) maintains its stance not to devalue the local currency amidst worsening economic conditions.

However, demand pressure in the investors and exporters’ foreign exchange window has failed to pamper the local currency despite N65 rebates offered to exporters to trade through the channel.

Nigeria’s foreign currencies reserve recorded its first depletion in five weeks as it decreased by $160.32 million in the just concluded week to $39.65 billion. Notwithstanding, external reserves marginally rose 0.3% when compared with March.

Rising oil prices and low market intervention had helped the nation’s external reserve position in the past weeks. Meanwhile, the ongoing lockdown in China following a resurgence in Covid-19 cases helped temper crude oil demands.

Consequently, the average Brent crude oil price fell 10.9% month on month to $104.44 per barrel litre from $117.25 in March. But, Bonny light price inched higher to $107.09 per barrel.

In the parallel market, the local currency also lost value as the foreign exchange rate hits N590 per the United States dollar, according to channel checks conducted by MarketForces Africa. READ: CBN Devalues Naira 12.95% despite Rising Foreign Reserves

At the Interbank foreign exchange market, the exchange rate closed flat at N430.00/$ amidst CBN’s weekly injections of $210 million. Of the sum injected in the just concluded week, $100 million was allocated to Wholesale Secondary Market Intervention Sales (SMIS).

A total sum of $55 million was allocated to Small and Medium Scale Enterprises and $55 million was sold for Invisibles. Meanwhile, the Naira-dollar exchange rate went in mixed directions across the foreign exchange forward contracts.

Specifically, two months, three months and 12 months contracts gained 0.05%, 0.05% and 0.18% to close at N420.92/$, N423.80/$ and N448.02/$ respectively. However, one month and six months contracts lost 00.11% and 0.01% to close at N418.46/$ and N432.66/$ respectively.

Afrinvest analysts observed an increase in crude oil supply as the Biden administration and members of the International Energy Agency (IEA) authorized the release of more crude from their respective strategic stockpiles, to alleviate soaring energy prices.

Elsewhere, the naira depreciated by 0.2% both at the I&E window and parallel market to N419.00/$ and N590.00/$, respectively.

At the investors and exporters FX window, total turnover – as of 28 April 202- increased by 44.3% from the beginning of the week to $866.38 million, with trades consummated within the N410.00 – N453.15/$ band. #Market Devalues Naira to N418.50 as FX Reserve Drops