Nigeria’s local currency, naira, gains as dollar volume traded at the investors and exporters foreign exchange window (IEW) drops 83% amidst scarcity of dollar inflow into the external reserves.
The decline in turnover suggests that dollar inflow from foreign portfolio investors (FPI) during the week, coincidentally, the Central Bank (CBN) used up $17.05 million from the nation’s external reserves.
Nigeria’s foreign exchange reserves printed at $33.10 billion after recording a marginal decline of US$17.05 million this week. Despite the uptrend in global prices of oil, external reserves continue to free falling due to steep demand for the greenback.
“Demand for dollars will always be there as long Nigeria cannot produce all that the citizen demand.
“The problem is how policymakers would restructure the economy in such a way that the nation would earn more dollars to meet productive demand”, analysts summarized at MarketForces Africa forum held virtually
At the investors and exporters foreign exchange window, Naira gains 0.3% to N410.38 but depreciated by 0.2% to N506 a dollar in the parallel market.
In its market report, Cordros Capital analysts said total turnover at the CBN Investors and Exporters window decreased by 83.4% week to date to US$90.13 million.
Analysts at the investment firm hinted that trades were consummated within the range of N411.80 – 423.90 to a dollar band.
Also, in the forwards market, the Naira rate appreciated 0.1% on the 1-month contract to N413.32 while the 3-month contract also gained 0.1% to N417.10 per dollar.
However, the local currency depreciated 0.1% on the 6-month to N424.04 a dollar and plunged by 0.3% to N437.00 dollar on 1-year contracts.
“We expect improved liquidity in the IEW over the medium term, given our expectation of increased oil inflows in line with the rise in crude oil prices, and inflows from foreign currency borrowings”, Cordros analysts projected.
Accordingly, analysts said they expect the naira to remain relatively range-bound between N410.00 – N415.00 per dollar at the IEW.
Meanwhile, the naira exchange rate closed flat at N380.69 at the Interbank Foreign Exchange market amid weekly injections of US$210 million by CBN into the forex market.
A total sum of 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.
“In the new week, we expect Naira to weaken against the greenback at most foreign exchange windows as CBN’s capacity to defend the Naira weakens amid plunging external reserves”, Cowry Asset analysts said.