Naira Trades at N416 as FX Reserve Slides
The Nigerian local currency, naira, trades at N416 to a United States dollar at the Investors and Exporters foreign exchange window on Friday close as the nation’s gross external reserve slides.
Though still weak, naira recorded moderate recovery in the new level it has been trading recently at the Nigerian Autonomous Foreign Exchange Fixing market.
The monetary authority insists on supporting the local currency using the nation’s external buffer but scarce dollar inflow due to rising imports bills, and low export receipts continue to mount pressures.
Most investment banking firms are finding it difficult to advise clients to hold naira assets due to the local currency weakness as a store of value – Naira continues to lose value for local and international purchases.
This has worsened the price level in the country as rising production costs are driven by devaluation of the local currency and a high double-digit inflation rate in Nigeria.
In their separate nine (9) months financial statements in 2021, a large number of listed companies recorded foreign exchange losses, which eventually reduce their bottom line.
Data shows that Nigeria’s FX reserve sustained its descent for the twelfth consecutive week on the back of the Central Bank of Nigeria (CBN) continued support of the naira at the official channels.
Data shows that Nigeria’s gross external reserve declined by about $163.81 million from last week close to about $40.15 billion as CBN’s interventions across the various FX windows outweighed dollar inflows.
Currencies traders told MarketForces Africa that the local currency depreciated against the greenback by 0.52 per cent to close at N580 at the parallel market due to rising demand that was not met at the official FX window.
At the Interbank Foreign Exchange market this week, the naira exchange rate closed flat at N430.00 for a dollar amid CBN’s weekly injections of $210 million. Read: Bond Yield Tracks Higher as Naira Appreciates to N416
Of the total sum injected into the foreign exchange markets, a total sum of $100 million was allocated to Wholesale Secondary Market Intervention Sales (SMIS).
A total sum of $55 million was allocated to Small and Medium Scale Enterprises and the remaining $55 million was sold for Invisibles, according to a note from Cowry Asset Limited. Analysts noted that the Naira exchange rate rose for all the foreign exchange forward contracts.
Transaction details in this segment shows that 1 month, 2 months, 3 months, 6 months and 12 months contracts increased by 0.44%, 0.63%, 0.63%, 0.74% and 1.25% to close at N418.92, N422.33, N425.57, N434.99 and N449.81 respectively.
“We expect Naira to stabilise against the dollar amid rising crude oil prices at the international market, even as CBN begins implementation of e-invoicing and e-evaluation for import and export payments”, Cowry Asset projected.
