Naira Hits N446 as External Reserves Decline to $37.19bn

Naira Hits N446 as External Reserves Decline to $37.19bn

Amidst uncertainties in the macroeconomic environment, the Nigerian local currency, the naira, slides further to N446 against the United States (US) dollar at the investors’ and exporters’ foreign exchange window.

The figure represents an appreciation of 0.11 per cent compared with N445.50 to a dollar it exchanged the previous day.

Earlier in the week, demand pressures decline as the market waited for the outcome of the monetary policy committee meeting. Broadstreet analysts insist that the Naira should be devalued as the local currency is currently overpriced.

Unfortunately, according to a slew of economists that MarketForces Africa engages in discussion, a devaluation would worsen the Nigerian poverty index. Economists claim that an official depreciation of the naira would hit the economy, hard and fast in a way that could trigger job losses and price pressures.

At the FX market yesterday, the open indicative rate closed at N444.17 to the dollar on Wednesday. An exchange rate of N447 to the dollar was the highest rate recorded within the day’s trading before it settled at N446.

The naira sold for as low as 439.03 to the dollar within the day’s trading. A total of 145.89 million dollars was traded in foreign exchange at the official Investors and Exporters window on Wednesday.

Attracting foreign currency inflows into the nation has been a major problem that the local currency faces. Nigeria’s External reserves remain under pressure as a result of weak inflow from foreign investors and declining FX receipts from oil sales. 

The government has failed to leverage on oil windfall to boost its external reserves. Production volume has been persistently affected by oil theft and weak oil infrastructure. This made it impossible for the country to meet the Organisation of Petroleum Exporting Countries (OPEC) quota.

Also, MarketForces Africa noted that foreign investors remain on the sidelines given the lingering lack of FX reforms, higher global interest rates and weak macroeconomic narrative. READ: Naira Sheds Value on Maturing Political Uncertainties

In addition, CBN’s FX supply to the different FX market segments remains significantly below pre-pandemic levels. In contrast, the demand for the greenback remains high as market players continue to source for FX to fulfil and clear their outstanding obligations.

Consequently, since the last policy meeting, the local currency depreciated by 2.4% to N446.67 at the official market as of 16 November.  Gross external reserves depleted by 3.1% to USD37.19 billion in two months, reflecting sustained CBN’s FX interventions, albeit significantly below pre-pandemic levels. 

Data from the apex bank show that gross foreign reserves have declined by 8.2% or $3.34 billion year-to-date.  In a macro note, analysts said they expect the sustained FX reserve depletion to be a cause of concern given how the reserve is now declining beyond the comfort levels of the CBN. #Naira Hits N446 as External Reserves Decline to $37.19bn