Naira stable despite decline in Oil prices, foreign reserves

Naira was stable last week despite the decline recorded in the global prices of oil and the nation’s external reserves, acting as a buffer for supporting the local currency.

The ongoing US – China trade war intensified following China’s retaliatory tariffs against US$75.0 billion worth of US goods, putting up to 10.0% on existing tariffs, mostly agricultural products.

This comes after an additional tariff on $300.0 billion worth of Chinese goods effective from September 1 and December 15, 2019, Afrinvest stated.

As a result, the price of Brent crude oil slumped to as low US$58.35 per barrel during the week while the foreign reserves level fell to US$43.7 billion, down 0.9% from US$44.5 billion recorded last week Wednesday.

Afrinvest added that it noted that China has put on hold the proposed retaliatory measures as at the end of the week.

Thus, the CBN spot rate traded flat all week to close at N307.00/US$1.00, depreciating 5kobo week on week from N306.95/US$1.00.

Similarly, at the parallel market, rate opened at N360.00/US$1.00 and traded flat all week. At the Investors’ & Exporters’ (I&E) FX Window, the NAFEX rate opened the week at N362.69/US$1.00 and closed at N362.93/US$1.00 on Friday, appreciating 21 kobo from N363.14/US$1.00.

Activity level in the importers and exporters (I&E) Window fell 7.9% to US$1.6 billion from US$1.8 billion recorded in the previous week.

At the FMDQ Securities Exchange (SE) FX Futures Contract Market, the total value of open contracts settled at US$11.0 billion, up US$82.0 million (0.8%) from US$10.9 billion in the prior week.

The SEPT 2020 instrument at the contract price of N365.47 received the most buying interest in the week with additional subscription of US$8.4 million which took total value to US$14.15 million.

On the other hand, the OCT 2019 instrument with the contract price of N363.82 was the least subscribed with a total value of US$1.1 billion, with subscription declining by US$54.0 million.

Despite external reserves at US$43.7 billion and declining crude oil prices, we maintain a positive outlook on the CBN’s continued ability to support FX market liquidity and stability, Afrinvest remarked.

Naira stable despite decline in Oil prices, foreign reserves

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