SAT 12 JUNE, 2021-theGBJournal- Nigeria’s foreign exchange reserves sustained its decline, dipping USD122.75 million w/w to USD34.05 billion (9th June 2021) – the lowest since November 2017.
The country’s FX reserves have declined consistently despite recent rise in crude oil prices, with benchmark Brent crude trading as high as US$72.70 as of June 11, a level it first reached way back in March 2021.
Analysts attribute the persistent decline to Central Bank of Nigeria’s (CBN) consistent intervention in the foreign exchange market to prop the local currency.
Meanwhile, the naira was flat at NGN410.80/USD and NGN502.00/USD at the I&E window (IEW) and parallel market, respectively.
At the IEW, total turnover (as of 10th June 2021) decreased by 29.7% WTD to USD538.63 million, with trades consummated within the NGN400.00 – 420.77/USD band. In the Forwards market, the rate appreciated across the 1-month (+0.1% to NGN413.33/USD), 3-month (+0.2% to NGN419.51/USD), 6-month (+0.2% to NGN428.36/USD) and 1-year (+0.3% to NGN446.56/USD) contract.
We expect improved liquidity in the IEW over the medium term, given the higher oil prices and an expected increase in crude oil production volume. Accordingly, we expect the naira to remain relatively range-bound (NGN410.00/USD – NGN415.00/USD) at the IEW.
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