Naira Tumbles Amidst Doubt Over FX Reserves Balance

Naira Tumbles Amidst Doubt Over FX Reserves Balance

The Nigerian naira exchange rate worsened on Monday following news that the total balance in the external reserves might have been over-rated. There have been concerns that the Central Bank of Nigeria (CBN) cooked its books in 2022. Yet, both local and investment foreign banking firm has not come to a consensus about the actual figure while the monetary authority keeps mum.

CardinalStone Partners estimated net FX reserves settled at $17.4 billion but Cordros Capital estimated that total balance in the country’s FX reserves was about $17 billion negative – JP Morgan’s latest report stands in the middle, estimating that the balance is likely to have dropped to $3.7 billion.

Nigerians and international stakeholders have never been this confused about data from the apex bank. It is much easier to predict the Nigerian naira exchange after every daily gain due to intermittent FX rate movement in the official market. The exchange rate of around N740 per United States dollar appears to be a resistance level that the naira cannot breach.

FMDQ data showed that the local currency depreciated from N739.52 versus the US dollar on Friday to N761.32 as demand outruns the supply side as a result of weak defence by the apex bank. Last week, the naira rallied against the dominant foreign currency in the market as NNPC’s $3 billion loan from the African Import-Export Bank beamed light to darkening FX markets.

MarketForces Africa also gathered that some International Oil Companies sold FX at the investors’ and exporters’ window in addition to the Central Bank of Nigeria’s support for the invisible sales.

Amidst pressures due to sustained scarcity of FX inflows into the economy, the apex bank also brought back the Bureau de Change into the currency market to reduce and monitor spurious demand while its capped FX spread for operators.

It is not however clear if the CBN would conduct weekly FX sales, which was the previous pattern before Godwin Emefiele, suspended governor of the apex bank, stopped BDCs operators alliance, citing terrorism financing and other infractions.

In the parallel market, the naira depreciated by 1.18% to N860 amidst question marks hanging over the true balance in Nigeria’s external reserves. Nigeria’s FX reserves stayed below $34 billion while JP Morgan’s estimate showed that total amount must have dropped to $3.7 billion in December 2022

Today, Brent crude fell 0.32% to $84.53 per barrel, while WTI crude gained 0.07% to $81.30 per barrel.  Oil futures were slightly lower, as market participants weighed the implications of a less-than-expected PBOC 1-year LPR cut.

This cut, at 3.45%, was lower than the previous 3.55%.  Elsewhere, gold was trading below $1,890 per ounce (-0.11%), influenced by higher US treasury yields and growing expectations of further policy rate hikes in advanced economies. #Naira Tumbles Amidst Doubt Over FX Reserves Balance Naira Gains 10% in Parallel Market, I&E Rate Settles at N739.52