Naira Drops As External Reserves Slumps Below $36bn

Total Currency In Circulation Hits N1.6tn, Says CBN

The Nigerian Naira is losing ground in foreign currency (FX) markets after the Central Bank of Nigeria’s (CBN) monetary policy committee (MPC) raised the benchmark interest rate to 18%. The Nigerian naira lost 0.1% against the US dollar at the investors’ and exporters’ foreign exchange window (IEW) as demand for FX outweighed supply.

The CBN revealed today on its website that its external reserves fell 2.76%, falling below $36 billion, as a result of its continued FX auction sales fueled by its market interventionist posture. To meet eligible needs, the CBN auctions out foreign currency to domestic banks. The dollar was trading at N752 in the parallel market after Nigerian banks informed clients of a 50% reduction in business and personal travel allowance.

According to Tolu Osinibi, Managing Director of FSDH Capital, the CBN allows for some depreciation of the local currency to enable for actual FX inflows into Nigeria. He mentioned that the CBN has been delaying the payment of its foreign exchange sales at retail auctions.

As a result, the difference between the official and parallel market rates is printed at N290, creating an opportunity for currency speculators to earn rapid money. The Nigerian Autonomous Foreign Exchange Fixing (NAFEX) rate moved between N445.9 and N462.5 per greenback last week, but finished at N461.8 on Friday.

Meanwhile, the non-deliverable forward rate has risen to N600 as the CBN’s foreign exchange backlog continues to grow. The retail secondary market intervention sales (SMIS) market FX spot rate stayed constant on Friday, closing at N462.

According to data collected from the FMDQ Exchange platform, the volume of dollars exchanged at the investors’ window climbed by 6.4% over the previous week to USD87.8 million.

In terms of the Chinese Yuan (CNY), the Naira fell by -0.7% w/w to close at N66.7/CNY, according to CBN statistics.

LEAVE A REPLY

Please enter your comment!
Please enter your name here