Naira Breaks Value as Foreign Reserves Tumble Again
The Nigerian local currency, Naira, breaks value as the investors and exporters window as gross external reserves decline further in the just concluded week. The local currency has lost significant value due to a steep rise in headline inflation and serial devaluation amidst the scarcity of foreign exchange inflow into the economy.
Indeed, it appears that there is no respite for the local currency at the parallel market as demand surge for the greenback raised exchange rate to N505 a dollar in the just concluded week.
Naira weakened against the dollar at the Investors & Exporters window as well as the Bureau De Change (BDC) and parallel markets by 0.12%, 0.40% and 0.40% respectively to close at N411.75, N500 and N505.00 respectively.
Despite sustained oil prices rally, the external reserves plunged to US$33.12 billion having shed more than US$113 million in a week. Market data showed that the exchange rate closed flat at N380.69 a dollar at the Interbank Foreign Exchange market amid weekly injections of US$210 million by Central Bank (CBN) into the forex market.
The breakdown of the CBN supply showed that US$100 million was allocated to Wholesale Secondary Market Intervention Sales (SMIS), US$55 million was allocated to Small and Medium Scale Enterprises and US$55 million was sold for Invisibles.
Elsewhere, the foreign exchange rate appreciated for most of the foreign exchange forward contracts: 2 months, 3 months, 6 months and 12 months exchange rates fell by 0.15%, 0.11%, 0.09% and 0.05% to close at N415.54, N417.65, N423.69 and N435.54 respectively.
However, 1 month rate depreciated by 0.02% to N413.52 while the spot rate remained at N379.00 to a dollar. Cowry Asset analysts said in an email to clients that it expects Naira to weaken against the greenback at most FX Windows as CBN’s capacity to defend the Naira weakens amid plunging external reserves.
Nigeria’s foreign exchange reserves sustained a decline, dipping US$113.15 million last week from previous to US$33.12 billion, though oil prices have maintained an uptrend with concern around volume production.
At the Investors and Exporters window, total turnover decreased by 24.5% week to date to US$526.79 million, with trades consummated within the N400.00 – 420.86 a dollar band, Cordros Capital said in a report.
“We expect improved liquidity in the IEW over the medium term, given our expectation of increased oil inflows in line with the rise in crude oil prices, and inflows from foreign currency borrowings.
“Accordingly, we expect the naira to remain relatively range-bound (N410.00– N415.00) at the investors and exporters window”, Cordros Capital said in a note to clients.
Naira Breaks Value as Foreign Reserves Tumble Again
