Naira Gains at Investors Window as Dollar Volume Slumps
Puling through tough currencies markets, Naira gains at investors’ and exporters’ window as the volume of dollars traded at the window bumps. Market data shows that naira closed the week at N410.80, from N411.50 a dollar in the previous week.
The Nigeria local currency has been battered with series of devaluations, from the official price of N197 in 2015 to N410 following the Central Bank of Nigeria unification moves.
However, the market moved in the opposite direction at the Bureaux and parallel markets as naira depreciated by 0.59% and 0.98% to close at N508.00 and N515.00 to a dollar respectively.
It appears foreign exchange users are beginning to source for FX at the alternative market amid the perceived inability of banks to meet their demands, Cowry Asset analysts said in a report.
The gain recorded in the currency market is however attributed to increased accretion into Nigeria’s external reserves, sending a positive signal ahead of the expected dollar inflow in the second half of 2021.
Also, stable oil prices keep hope alive for the petrol-dollar powered largest economy in Africa to meet its fiscal responsibility as Brent price retest $70 following reported slowdown due to rising covid-19 delta variants.
Recently, the global oil prices fell after the International Energy Agency warned that demand growth for crude and its products had slowed sharply as surging COVID-19 cases worldwide forced governments to revive movement restrictions.
Consequently, the Brent declined by 0.16% to close at $70.59 per barrel, while the Nigeria oil benchmark, Bonny Light, shed 0.19% to close at $69.64 per barrel.
Read Also: Oil Slumps on Covid-19 Delta Variant Worries, Strong Dollar
Data from the CBN shows that Nigeria’s foreign reserve halted a 1-month positive growth trend, but still posted a week-on-week gain of $22.32 million from the closing position of $33.56 billion to $33.58 billion on Thursday 12th July 2021.
At the Investors and Exporters window, Cordros Capital analysts reported that total turnover decreased by 15.6% from the beginning of the week to US$571.97 million, with trades consummated within the N400.00 – 421.96 band.
In the forwards market, the rate was flat at the 1-month contracts which were exchanged at N412.22 and 1-year at N434.91 but appreciated across the 3-month by 0.1% to N415.27 while 6-month contract up 0.1% to N421.65 a dollar.
“We expect improved liquidity in the Investors and Exporters window over the medium term, given our expectation of increased inflows from crude oil receipts, and inflows from FCY borrowings (USD6.18 billion) and IMF SDR (USD3.40 billion)”, Cordros analysts stated.
Meanwhile, the 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.
Of this, a total sum of US$100 million was allocated to Wholesale Secondary Market Intervention Sales, US$55 million was allocated to Small and Medium Scale Enterprises and US$55 million was sold for Invisibles.
“In the new week, we expect Naira to stabilize against the greenback at most FX segments amid increased accretion to the external reserves and expected allocations of dollar to the deposit money banks who have been mandated to service dollar demands of international travellers”, Cowry Asset added.
Naira Gains at Investors Window as Dollar Volume Slumps
