Naira Trades Strong as FX Reserve Nears $40bn
The Nigerian local currency, Naira, traded strong at the close of business on Friday in the Investors and Exporters foreign exchange window following a moderate rise in external reserve.
In the just concluded week, Nigeria’s external reserves rose 18 basis points to $39.80 as the global oil market faces uncertainties due to virus, and the Russia-Ukraine war.
Amidst the sustained scarcity of dollars and other foreign currencies for international transactions, Naira was exchanged at N418. 33 to the dollar at the Investors and Exporters window on Friday.
It had peaked at N419.50 to a United States dollar on Thursday amidst the expectation that the local currency will be devalued further.
There has been a minimal impact of high global prices of oil on the nation’s external reserve, thus weakening the apex bank market intervention to support the local currency.
In the just completed week, Nigerian Bonny Light crude oil rose above $108, the local currency suffered a 0.28% depreciation due to higher demand for the United States dollar.
However, production volume has been lowered than the Organisation of Petroleum Exporting Countries (OPEC) quota for the nation. This has reduced the size of foreign exchange receipts as crude accounts for some 70% of foreign currency inflows for the nation.
Naira also gained against the greenback at the parallel market to close at N585.00. At the Interbank Foreign Exchange market, N/$ closed flat at N430.00/$ amid CBN’s weekly injections of $210 million.
Of the sum injected, $100 million was allocated to Wholesale Secondary Market Intervention Sales (SMIS), $55 million was allocated to Small and Medium Scale Enterprises and $55 million was sold for Invisibles.
Meanwhile, the Naira/$ exchange rate went in mixed directions across the foreign exchange forward contracts. Specifically, 2 month, 3 months and 12 months contracts gained 0.05%, 0.05% and 0.18% to close at N420.92/$, N423.80/$ and N448.02/$ respectively.
However, 1 months and 6 months contracts lost 00.11% and 0.01% to close at N418.46/$ and N432.66/$ respectively.
Cowry Asset analysts expect some level of pressure on the Naira against the dollar due to anticipated pressure on foreign exchange amid electioneering activity coupled with weak petrodollar earnings.
At the Investors and exporter FX window, total turnover as of 21st April 2022 declined by 4.3% from the beginning of the week to Thursday to $556.21 million, with trades consummated within the N410.00 – N453.15/$ band.
The open indicative rate closed at N417.40 naira to the dollar on Friday. An exchange rate of N444 to the dollar was the highest rate recorded within the day’s trading before it settled at N418.33
The naira sold for as low as 410 to the dollar within the day’s trading. A total of $169.06 million was traded in foreign exchange at the Investors and Exporters window on Friday. #Naira Trades Strong as FX Reserve Nears $40bn
