Naira Trades Strong despite Marginal Decline in Oil Prices

Naira Trades Strong despite Marginal Decline in Oil Prices

The Nigeria’s local currency, naira, stands strong and stable amid decline in global prices of oil. In the week, oil prices dropped due to weak demand and partial supply glut with inventory rising speedily.

Meanwhile, at the interbank foreign exchange market, naira-dollar pair closed flat at ₦358.51/$, amid weekly injections by the apex bank.

Naira Trades Strong despite Marginal Decline in Oil Prices

The Central Bank of Nigeria injected total sum of $210 million into the foreign exchange market.

The sum of $100 million was allocated to Wholesale Secondary Market Intervention Sales (SMIS).

However, $55 million was injected into Small and Medium Scale Enterprises while $55 million was sold for invisibles.

Global price declined 3.6% week on week to $40.61 per barrel as the surge in COVID-19 cases to 9.4 million from 8.5 million last week.

This affected the reopening of economies.

On the domestic front, the external reserves moderated 0.3% week on week to $36.2 billion as at 25th June, 2020.

So, the CBN spot rate closed flat at ₦361/$1.00. At the parallel market, naira depreciated ₦4.00 to close at ₦457.00/$1.00.

At the Investors’ & Exporters’ (I&E) Window, the Nigerian Autonomous Foreign Exchange (NAFEX) rate appreciated 17 kobo to settle at ₦386.33/ $1.00.

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Meanwhile, activity level in the Investors & Exporters Window surged 138.3% to $297.2 million from $124.7 million recorded in the previous week.

The total value of open contracts of the naira at the FMDQ Securities Exchange (SE) FX Futures contract market declined 9.2% or $605.5 million to $13.1 billion as the JUNE 2020 instrument matured during the week.

The JULY 2020 instrument at contract price of ₦390.20 received the highest subscription of $383.14 million which took total value to $1.3 billion.

On the other hand, the APR 2021 instrument at contract price of ₦414.82 recorded the least subscription of $2 million for a total value of $473.2 million.

The Naira depreciated for most of the foreign exchange forward contracts.

Contracts for 1 month, 2 months, 3 months, 6 months and 12 months rates increased by 0.11%, 0.23%, 0.31%, 0.65% and 1.38% respectively.

They close at ₦387.95/$, ₦389.66/$, ₦391.47/$, ₦396.60/$ and ₦414.02/$ respectively.

“We expect exchange rates to remain range-bound across the different segments of the market in the coming week as investors await the resumption of FX sales by CBN”, Afrinvest said.

In the new week, Cowry Asset Management said it expects the Naira to depreciate against the dollar, especially at the I&E FX Window amid declining external reserves.

Naira Trades Strong despite Marginal Decline in Oil Prices