Naira Weakens As Reserves Stable At $3.45bn
As at Friday, 6th January, 2023, Nigeria’s gross external reserves stood at the $37 billion, lower than $40 billion mark since early February 2022, when it printed at $40.01 billion.
Cowry Asset Management analysts said in a note that at the current level, external reserves could cover on the average 8.4 months of merchandise imports on a balance of payments basis and a bit over 6 months when services are included (goods and services).
The naira, had lost about 11 per cent in 2022, though analysts believe that the apex bank intervention temperature dropped, the same time when foreign investors stayed aloof in the local economy.
CBN maintains strong rationing of foreign currency to keep the naira steady in the foreign exchange market while some multinational companies struggle to upstream dollar abroad, thus raised FX backlog.
Consequently, Nigerian banks told their customers via emails about decision to halt $20 minimum spend provided via their debit cards and also give insight that it will take 60-day to process FX for foreign school fees payment.
In the first quarter of 2023, demand for foreign currencies have been projected to rise due to expected increase in demand and opening of imports channels including election spending.
At the investors and exporters’ FX window the Naira slip for another week by N0.17 or 0.04 per cent week on week to close at N461.67 from N461.50 in the previous week.
Nigeria’s FX reserve maintained an accretion, as the gross reserve position rose by $70.13 million to close at $37.15 billion.
On activity levels, the total turnover at the investors’ window declined by 43.5 per cent to $290.93 million, on Thursday close with trades consummated within the N425.00 – N477.67 band.
Exchange rate worsened at the parallel market window as Naira lost 0.68 per cent or N5 week on week to N742 from N737 last week. Currencies traders said FX market participants maintained bids between N465 and N470 at the Investors and Exporters segment.
In the Forwards market, the naira depreciated 0.5 per cent at the 1-month to N470.35 and 1-year rate drop 0.2 per cent to N530.67 per contracts while 3-month contract appreciated 0.1 per cent to N479.54. Meanwhile, the naira was flat at N497.58 for 6-month contract.
Analysts maintained that FX liquidity issues will remain over the short-to-medium term over lack positive signal that denotes an improvement in FX supply relative to the pre-pandemic levels.
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