By Babajide Komolafe & Elizabeth Adegbesan
The Naira appreciated in the Investors and Exporters (I&E) window by 3.9 percent in January as the nation’s external reserves recorded the first monthly increase of $1.11 billion during the month, courtesy of the steady upward trend in crude oil price since December.
Data from the CBN showed that the external reserves rose to $36.395 billion Wednesday January 27th from $35.373 on December 31st last year. This translates to 3.1 or $1.11 billion monthly increase.
The monthly increase, the first since May last year, follows an upward trend in the reserves since December 18th, when it recorded the first daily gain to $34.841 billion, after a nine week decline which commenced from $35.672 billion in October.
The steady increase in reserves since December 18th is driven by the rally in the price of crude oil, which accounts for 90 percent of the nation’s dollar earnings.
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 $55.75 per barrel on Wednesday January 27th from $46.67 per barrel on November 30th, indicating a 19.4 percent increase during the eight weeks period.
Reflecting the increased dollar earnings, the naira appreciated in the Investors and Exporters (I&E) window by 3.9 percent or N15.87 to N394.13 per dollar in January from N410 per dollar at the end of December.
Turnover in I&E falls 84%
However, the volume of dollars traded (turnover) in the window of the foreign exchange market fell by 84 per cent, year on year (YoY) to $906.45 million in January 2021 from $5.6 billion in January in 2020.
Financial Vanguard analysis also showed that turnover in the window fell by 67 percent, month-on-month (m/m) from $2.78 billion in December 2020.
Vanguard analysis of weekly turnover in the window showed that $206.8 million was traded in the first week of January 2021. Turnover fell by 25 percent to $155.34 million in the second week and up by 98 percent to $306.88 million in the third week.
Turnover however fell by 29 percent to $237.42 million in the fourth week.