Victor EzejaNIGERIA’S local currency tumbled against the United States dollars and other major currencies at the foreign exchange market this past week, according to FMDQ data.
For the Naira, the week ended at an exchange rate of N414.90 to a dollar at the Investors and exporters foreign exchange window. This came just as currency traders at the parallel market exchanged a dollar for N571.50.
Join our WhatsApp ChannelHowever, the country’s foreign currency reserves moved to some $36 billion after it hit the bottom level of $30 billion in the second half of this year.
Imports demand-driven dollar shortage in the economy and the need for foreign bills payment hit hard on the naira driving unofficial devaluation at the autonomous foreign exchange market; the same for the black market.
Prime Business Africa reports that the expanded external reserves come on the back of an additional $4 billion expected inflow from proceeds of the Federal Government’s issuance of the Eurobond.
The expected increased dollar inflow will lend support to the Central Bank of Nigeria’s multi-tier foreign exchange policy. The CBN now sells dollar to the public through local banks following it severed relationship with bureaux de change. The apex bank says BDCs are an improper channel for Nigerians to access foreign currencies.
Cordros Capital analysts’ data accessed by PBA showed that external reserves closed higher by as much as US$498.47 million, over the previous week, amounting to some US$35.95 billion. This surpasses the 2021 start mark of US$35.37 billion.
Data from the FMDQ platform also shows that the naira depreciated by 0.5% this past week, to N414.90 at the Investors and Exporters foreign exchange window. This came even as Prime Business Africa reports that dollar volume transactions showed a significant decline.
The exchange rate also declined by 0.3% to N571.50 at the parallel market. Although the CBN officially derecognised the parallel market as not being representative of the true value of the naira, this position contrasts with that of investment analysts.
Statistics from the Investors and Exporters window showed that total turnover decreased by 34.0% from the beginning of the week to US$693.94 million; just as Cordros Capital observed that tradings were consummated within the N404.00 – 448.53 band.
For the forward markets, exchange 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 naira-to-dollar depreciation.
On the back of CBN’s weekly injection of US$210 million into the forex market, the foreign exchange rate closed flat at N380.69 a dollar at the Interbank Foreign Exchange market.
Of the $210 million injection, US$100 million was allocated to Wholesale Secondary Market Intervention Sales (SMIS); US$55 million to Small and Medium Scale Enterprises, and US$55 million was sold for Invisibles.
According to analysts, there will be improved liquidity in the investors and exporters foreign exchange over the medium term, in the light of expected increase in oil inflows in tandem with rise in crude oil prices and inflows from foreign currency borrowings as well as the $3.5 billion inflow from the International Monetary Fund (IMF) special drawing rights (SDR).
The naira is expected to remain range-bound N410.00-N415.00 at the Investors and Exporters foreign exchange window this new week.
Victor Ezeja is a passionate journalist with six years of experience writing on economy, politics and energy. He holds a Masters degree in Mass Communication.
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