Naira Slumps as FX Reserves Reduce by $210m after Auction
The naira exchange rate worsened in the official currency market on Tuesday, reversing successive daily gains that followed the Central Bank of Nigeria’s (CBN) US dollar sales to banks.
Nigeria’s gross external reserves balance reduced by $210 million on Monday following retail Dutch Auction sales conducted last week. Data from the CBN showed the foreign reserves balance cleared $36.620 billion at the beginning of the week, from $36.830 billion on Friday.
In the official market, the naira weakened against the US dollar, depreciating by 0.71% to ₦1,582.09 per US dollar as demand surged faster than total FX in the supply side.
Naira had started to recalibrate by recovering losses in the forex market before it made 360-degree turn on Tuesday. Analysts still remain bullish on the exchange rate outlook as CBN FX sales signal positive supply outlook in the official FX market.
In the parallel market, the naira closed at an average of ₦1,585 per US dollar as demand for foreign currency for invisible transactions accelerated. Exchange rate in the black market had risen to N1,580 per greenback, reflecting the positive impacts of retail Dutch Auction system sales by the CBN last week.
The authority multi-directional policies aim at boosting exchange rate position in the currency market is expected to yield results – in the absence of shocks, analysts said.
The government’s recent mandate that the NNPCL to sell 450,000 barrels of crude oil per day directly to the Dangote Refinery and other local refineries has been consider as one of the avenue to create demand for the naira – estimated to save over US$7 billion in foreign exchange.
There is also a plan to issue $500 million domestic US dollar bonds to boost the nation’s FX liquidity amidst persistence shortage.
In the global commodity market, Brent crude dipped by 1.50% to $81.06 per barrel, and West Texas Intermediate (WTI) crude declined by 1.63% to $78.76 per barrel.
This decline marked the end of WTI’s five-day winning streak, as traders weighed the potential for an oversupply with the ongoing tensions in the Middle East.
Additionally, the International Energy Agency’s recent report suggested that inventory declines would ease in the final quarter, while OPEC adjusted its demand forecasts downward due to weaker-than expected Chinese demand. #Naira Slumps as FX Reserves Reduce by $210m after Auction
