Naira Depreciates as Nigeria’s Foreign Reserves Near $36 Billion
The Nigerian local currency suffered at the foreign exchange market this week as the naira tumbles against the United State dollar and other major currencies.
Naira ends the week at N414.90 to a dollar at the Investors and exporters foreign exchange window, and currencies traders in the parallel market exchange a dollar for N571.50.
Accretion into the nation’s foreign currency reserves moved the balance to about $36 billion after it had hit the bottom level of $30 billion during the second half of 2021.
Dollar shortage in the economy amidst rising demand for imports and foreign bills payment has peppered the local currency and drive continual unofficial devaluation at Nigerian Autonomous Foreign Exchange and black markets.
However, the external reserves expanded amidst the expectation of an additional $4 billion inflow from proceeds of the Eurobond issuance by the Federal Government.
The increased inflow of the greenback would support the central bank multi-tiered foreign exchange policy.
Recalled the apex bank sells dollar to the public via the local banks after it ends the relationship with bureau de change, which the CBN now considered as an improper chain for distributing foreign currencies to Nigerians.
External reserves closed higher by US$498.47 million above the previous week to settle at US$35.95 billion, surpassing the year start mark of US$35.37 billion, according to Cordros Capital analysts.
Data from the FMDQ platform shows that the naira depreciated by 0.5% this week to N414.90 at the Investors and Exporters foreign exchange window amidst decline dollar volume transactions.
Also, the exchange rate declined 0.3% to N571.50 at the parallel market. The CBN has derecognised the parallel market officially as not representing a true value of the naira in contradiction to investment analysts’ position.
At the Investors and Exporters window, total turnover decreased by 34.0% from the beginning of the week to US$693.94 million. Cordros Capital hinted that trades were consummated within the N404.00 – 448.53 band.
However, in the forward markets, exchange the rate was flat at the 1-month (N416.07/USD) contract, while the 3-month (-0.3% to N422.22), 6-month (-0.4% to 431.67) and 1-year (-1.2% to N450.61) contracts continue to reflect the depreciation of the naira to the greenback.
The foreign exchange rate closed flat at N380.69 a dollar at the Interbank Foreign Exchange market amid weekly injections of US$210 million by CBN into the forex market.
From the sum, US$100 million was allocated to Wholesale Secondary Market Intervention Sales (SMIS), US$55 million was allocated to Small and Medium Scale Enterprises and US$55 million was sold for Invisibles.
Analysts expect improved liquidity in the investors and exporters foreign exchange over the medium term, given Cordros Capital expectation of increased oil inflows in line with the rise in crude oil prices and inflows from foreign currency borrowings and about $3.5 billion inflow from the Internationa Monetary Fund (IMF) special drawing rights (SDR).
Accordingly, the naira is projected to remain relatively range-bound N410.00-N415.00 at the Investors and Exporters foreign exchange window next week.
