SAT, 05 DEC, 2020-theGBJournal- Nigeria’s FX reserves continued its descent, as the gross reserves position declined by USD115.83 million w/w to USD35.30 billion. This is as the outflows for the CBN’s interventions across the various FX windows continue to outstrip dollar inflows.
At the I&E window, the naira depreciated further and hit a new low, as it weakened by 1.2% to NGN395.00/USD, in the face of reduced supply from the CBN. Conversely, pressure on the naira eased in the parallel market (+5.3% to NGN475.00/USD) following the CBN’s announcement that it would allow beneficiaries of remittances to be paid in dollars, a measure introduced to increase the supply of dollars to BDCs.
Across the forward contracts, the naira weakened across the 1-month (-1.8% to NGN397.56/USD), 3-month (-3.9% to NGN406.35/USD), 6-month (-6.6% to NGN417.98/USD) and 1-year (-11.0% to NGN439.56/USD) contracts.
Going forward, we expect CBN’s FX management strategies to continue supporting the naira at its current level at the official and I&E windows.
However, we believe the parallel market rate will remain volatile and continue to trade above the CBN’s Relative Purchasing Power Parity (RPPP) of NGN433.64/USD and our REER fair value estimate of NGN453.67/USD at the current level of intervention in the FX market.
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