Naira Mixed at Official, Parallel Markets as FX Reserve Drops

The Nigerian local currency, naira, recorded a mixed result in the just concluded week, trading between the highs and the lows at the Investors and Exporters FX window and the parallel market.

The nation’s foreign reserve dipped further amidst low dollar inflow despite rising prices in the global oil market. Crude oil crossed the $91 per barrel mark at the global oil market this week but Nigeria production has worsened.

Following rising import bills and market intervention, Nigeria’s FX reserves declined $136.84 million week on week to $39.98 billion. Since October 2021, the nation’s external reserve had keep above the $40 billion mark.

Weak investment in oil infrastructure, supply chain pressures has continue to impact the government ability to meet the Organisation of Petroleum Exporting Countries (OPEC) quota for members.

Though Shell recently lifted force majeure on Forcados while other oil resources have received upgrades; but then production and supply capacity remains below expectation – causing Nigeria to lose billions of dollars.

In the just concluded week, the exchange rate rose (Naira depreciated) by 0.08% to close at N416.33 at the Investors and Exporters FX Window despite the crude oil price hitting USD91.30 per barrel.

However, Nigeria’s local currency appreciated against the greenback by 1.24% to close at N572.83 at the parallel market as demand moderated in the segment during the week. At the Interbank Foreign Exchange Market, the FX rate closed flat at N430.00 amid CBN’s weekly injections of $210 million.

Of the sum injected, USD100 million was allocated to Wholesale Secondary Market Intervention Sales (SMIS), USD55 million was allocated to Small and Medium Scale Enterprises and USD55 million was sold for Invisibles.

FX exchange rate strengthened or Naira gained for all the foreign exchange forward contracts, according to currency traders’ notes.

Specifically, 1 month, 2 months, 3 months, 6 months and 12 months contracts decreased by 0.09%, 0.12%, 0.19%, 0.21% and 0.23% to close at N418.55, N421.82, N424.77, N434.08 and N448.78 per dollar respectively.

In its market note, analysts at Cowry Asset expect Naira to remain relatively stable against the United States dollar amid high crude oil prices at the international crude market.

Although the lower than budgeted crude oil production remains worrisome as this would reduce the country’s foreign currency proceeds, analysts said. #Naira Mixed at Official, Parallel Markets as FX Reserve Drops.