As naira depreciates by N16.25 kobo
External reserves shed $1.28bn
By Babajide Komolafe & Elizabeth Adegbesan
The volume of dollars traded (turnover) in the Investors and Exporters (I&E) window of the Nigerian foreign exchange market rose by 43 percent, month-on-month, to $1.3 billion in February from $906.44 million in January 2021.
Vanguard analysis of weekly turnover in the window showed that $258.19 million was traded in the first week February.
Turnover rose by 44 percent to $372.2 million in the second week and dipped by 42 percent to $214.71 million in the third week.
The turnover rose by 108 percent to $446.18 million in the fourth week of February.
However, the naira depreciated by N16.25 kobo in the window during the month as the indicative exchange rate rose to N410.25 kobo per dollar on February 26th from N394 per dollar on February 1.
Analysts however opined that the naira will enjoy some stability this week in response to the continued rise in crude oil price.
“In the new week, we expect Naira/USD to stabilise at the I&E FX Window as crude oil prices sustain the bullish momentum”, said analysts at Cowry Assets Management Limited.
After falling below $25 per barrel in April, due to the severe impact of the COVID-19 pandemic, crude oil prices went through a bumpy recovery which accelerated in December.
For example, the price of Nigeria’s Bonny Light crude oil rose steadily to $66.26 per barrel at the close of business on Friday from $46.67 per barrel on November 30th, indicating a 42 percent percent increase in three months.
However, this upward trend in dollar revenue from oil is not reflected in the fortunes of the nation’s external reserves.
Data from the Central Bank of Nigeria (CBN) showed that the reserves fell by $1.28 billion in one month.
The reserves fell to $35.225 billion on Tuesday February 23rd from $36.508 billion on Thursday January 21st.
While attributing the decline to CBN’s increased intervention in the forex market to support the naira, analysts at Financial Derivatives Company however expressed optimism that the continued upward trend in crude oil price will lead to increase in the reserves.
They said: “Gross external reserves are expected to increase on higher oil prices. Brent is currently trading at pre-pandemic levels ($63pb) and this would strengthen the government’s buffers.”