Naira Falls as Dollar Volume Traded at Investors Window Slides
Naira, the Nigerian local currency, falls as the volume of the United States (US) dollars traded at investors and exporters’ window falls big this week, a similar pattern to market record last week.
The exchange rate movement was overshadowed by the strong dollar which eclipsed possible effects of increased buffer following accretion into the nation’s external reserves.
For the first time in six months, Nigeria’s external reserves witnessed an inflow, albeit marginal, amidst an uptrend in the global prices of oil.
Oil market data shows that Brent trades near $74 a barrel. Oil prices were little changed on Friday and Brent was on track to end the week higher after a strong recovery from Monday’s steep slide, underpinned by expectations that supply will remain tight through the year.
Market data shows that at the investors and exporters window, Naira tumbled 0.03% to N411.50 a dollar but was well appreciated at the parallel market.
After it had peaked at N505/508, some currency traders confirmed that the local currency traded at N504 a dollar at the parallel market on Friday.
Despite the apex bank stance to support the local currency, the value of the naira has continued to drop at the official market, from N197 in 2015 to N410.
This week, Nigeria’s FX reserves recorded the highest accretion in twenty-five weeks, as the gross reserves position increased by US$53.48 million to US$33.17 billion, analysts at Cordros Capital said in a note.
Naira exchange rate closed flat at N380.69 a dollar at the Interbank Foreign Exchange market amid weekly injections of US$210 million by CBN into the forex market.
Following a similar pattern, US$100 million was allocated to Wholesale Secondary Market Intervention Sales (SMIS), US$55 million was allocated to Small and Medium Scale Enterprises and USD55 million was sold for invisible.
Meanwhile, the volume of dollars traded at investors and exporters’ window tumbled 59.3% to $306.01 million from the beginning of the week to date.
According to analysts, the decline in turnover suggests that dollar inflow from foreign portfolio investors (FPI) during the week. Analysts at Cordros Capital said in an email to clients that trades were consummated at the window within N403.22 and N420.95 a dollar.
In the Forwards market, analysts said the exchange rate appreciated across the 1-month (+0.1% to N413.01/$) and 3-month (+0.1% to N416.55/$), 6-month (+0.2% to N423.20/$) and 1-year (0.2% to N436.29/$) contracts.
“We expect improved liquidity in the Investors and Exporters Window over the medium term, given our expectation of increased oil inflows in line with the rise in crude oil prices, and inflows from foreign currency borrowings”, analysts said.
In its projection, Cordros Capital expects the naira to remain relatively range-bound N410.00/$ – N415.00 a dollar at the Investors’ window.
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Naira Falls as Dollar Volume Traded at Investors Window Slides
