Naira Crashes to N419 as External Reserves Sink
The Nigerian naira traded weak at N419 to the United States dollar on Friday at the Investors and Exporters foreign exchange (FX) window due to rising demand and lower supply that created a disequilibrium position at the official window.
Data from the FMDQ Exchange platform shows that the exchange rate depreciated against the greenback by 0.2% to N419, reversing the previous days’ gain due to market pressures emanated from increasing import bill payments.
Inflow into the external reserves remained weak despite relatively high oil prices in the global market. However, Nigeria’s crude oil production volume has been underperforming the Organisation of Petroleum Exporting Countries (OPEC) and allies quota.
Data from the Central Bank of Nigeria (CBN) showed that the nation’s external reserve decreased by $152.55 million last week to $39.43 billion amidst low accretion and higher import payment bills. This is happening at a time when foreign portfolio investors are exiting the country’s financial markets.
FX backlog remains heavy with CBN capital control measures to keep the local currency from free falling. The apex bank also introduced N65 rebates for exporters that transacted through the investors and exporters’ FX window.
Despite these, the naira continues to lose value.
At the Investors and Exporters FX window on Thursday, total turnover decreased by 57.1% from the beginning of the week to $379.18 million. Traders at Cordros Capital said in a report that trades were consummated within the N410.00 – N453.15 per dollar band.
However, Naira depreciated against the greenback at the parallel market by 19.00% to close at N592.00, according to traders’ notes reviewed by MarketForces Africa.
At the Interbank Foreign Exchange market, the exchange rate closed flat at N430.00 to a dollar amid CBN’s weekly injections of $210 million, Cowry Asset Management said in its weekly market report.
Of the sum injected into the FX market, $100 million was allocated to Wholesale Secondary Market Intervention Sales (SMIS), $55 million was allocated to Small and Medium Scale Enterprises and $55 million was sold for Invisibles.
Meanwhile, Cowry Asset said in a note that the exchange rate went in mixed directions across the foreign exchange forward contracts.
The investment firm report shows that 2 months, 3 months and 12 months contracts gained 0.05%, 0.05% and 0.18% to close at N420.92, N423.80 and N448.02 respectively. Nigeria’s Per Capita Income Crashes to 1981 Level –World Bank
However, analysts noted that 1 month and 6 months contracts lost 00.11% and 0.01% to close at N418.46 and N432.66 respectively.
“In the new week, we expect some level of pressure on the Naira against the dollar due to anticipated pressure on foreign exchange amid electioneering activity coupled with weak petrodollar earnings, “Cowry Asset said. #Naira Crashes to N419 as External Reserves Sink