SAT, 02 JULY, 2022-theGBJournal| Nigeria’s FX reserve maintained its accretion for the fifth consecutive week, as the gross reserve position grew by USD230.14 million w/w to USD39.16 billion (30 June 2022).
Across the FX windows, the naira weakened against the US dollar by 1.1% w/w to N425.00/USD at the I&E window and by 0.2% to N615.00/USD in the parallel market. At the I&E window, total turnover (as of 30 June) declined by 7.1% WTD to USD549.17 million, with trades consummated within the N410.00 – N444.00/USD band. In the Forwards market, the naira depreciated at the 1-month (-1.0% to N424.65/USD), 3-month (-1.0% to N431.97/USD), 6-month (-1.1% to N443.59/USD), and 1-year (-1.2% to N467.12/USD) contracts.
Although the CBN has enough liquidity to support the FX market over the short term, we highlight that foreign inflows are paramount for sustained FX liquidity over the medium term. Considering the tepid accretion to the reserves given the low crude oil production level and elevated PMS under-recovery costs, FPIs which have historically supported supply levels in the IEW will be needed to sustain FX liquidity levels in the medium to long term.
Hence, Cordros Research analysts 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.
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