Naira Lost Against Dollar as External Reserves Declined
The Nigerian local currency, naira, loses steam across the foreign exchange (FX) markets amidst a resurgence of a fresh covid-19 variant in South Africa, currencies traders hint that demand for United States dollars increased during the week.
With the demand pressures, the local currency sheds 0.2 per cent of its opening value at the investors and exporters foreign exchange window to close at N415.07, weakened further in the parallel market.
Data tracked by MarketForces Africa analysts shows that the current spot rate at the official window appears to mid-trading point for the local currency in the past weeks. Unstable dollar injections for eligible imports impact the exchange rate and speculators are not giving up on the low-down FX Policy.
Risk pressures continue to rise amidst the threat of covid-19 variant and strategic petroleum reserves release, combating oil prices uptrend. Analysts told MarketForces Africa that dollar inflow from oil export could recede due to rising pressures on crude prices in the global market.
Meanwhile, Nigeria’s foreign reserve sustained its decline this week, according to data from the Central Bank. At the press time, the nation’s gross external reserves closed lower by US$61.05 million this week to US$41.33 billion.
In the parallel market, the foreign exchange rate declined 2.3% to N563.00 a dollar while the United States dollar is also facing pressures in the global foreign exchange market against major currencies.
At the investors and exporters FX window, total turnover increased by 19.2% from the beginning of the week date to USD783.39 million, with trades consummated within the N406.00 – 453 per dollar band.
In the forwards market, the 1-month contract dropped off 0.1% to N415.94 to a dollar, 3-month also dipped by 0.1% to N421.22, 6-month dropped 0.1% to N430.36 per dollar.
Also, the 1-year contract declined 0.2% to N448.01, reflecting the depreciation of the naira to the greenback. At the window, most participants maintained bids between N406.00 and N452.56 per dollar.
Elsewhere, the exchange rate closed flat at N430.0 per dollar at the interbank foreign exchange market amid its weekly injections of US$210 million.
Of the sum injected, 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.
In the new week, analysts at Cowry Asset said they expect Naira to weaken slightly against the USD as external reserves threaten to breach its current level of US$41.33 billion. #Naira Lost Against Dollar as External Reserves Declined