SAT, 28 MAY, 2022-theGBJournal| Nigeria’s FX reserves decreased by USD125.53 million w/w to USD38.63 billion (24 May 2022). Across the FX windows, the naira was fell by 0.1% to NGN419.50/USD at the I&E window (IEW) and depreciated by 0.7% to NGN610.00/USD at the parallel market.
Cordros analysts believe the Central Bank of Nigeria (CBN) has enough supply to support the FX market over the short term, given inflows from the recently issued Eurobond and the IMF’s SDR.
However, they highlight that foreign inflows are paramount for sustained FX liquidity over the medium term, in line with their expectation that accretion to the reserves will be tepid given that crude oil production levels remain pretty low.
Thus, FPIs which have historically supported supply levels in the IEW will be needed to sustain FX liquidity levels over the medium term.
Hence, we think further adjustments in the NGN/USD peg closer to its fair value and flexibility in the exchange rate would be significant in attracting foreign inflows back to the market.
At the I&E window, total turnover (as of 26 May 2022) decreased by 31.4% WTD to USD428.10 million, with trades consummated within the NGN410.00 – NGN453.55/USD band. In the Forwards market, the rate weakened on the 1-month (-0.3% to NGN419.66/USD), 3-month (-0.4% to NGN426.54/USD), 6-month (-0.7% to NGN437.61/USD) and 1-year (-0.4% to NGN458.67/USD) contracts.
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