SAT, JULY 08 2023-theGBJournal | Nigeria’s FX reserve continued to weaken for the seventh consecutive week, as the gross reserve position fell by US$60.27 million w/w to close at US$34.06 billion (6 July 2023).
Meanwhile, the naira depreciated by 1.0% to N776.90/USD at the I&E window (IEW), with total turnover (as of 6 July) declining by 48.1% WTD to USD367.23 million.
FX trades at the IEW were consummated within the N600.00 – N820.00/USD band.
According to the data obtained from the FMDQ, the total inflows into the Investors & Exporters Window (IEW) increased for the second consecutive month, rising by 23.8% m/m to USD1.41 billion in June (May: USD1.14 billion).
On the one hand, foreign inflows (+44.3% m/m to USD298.8 million) increased but remain underwhelming relative to pre-pandemic levels (2019FY monthly average: USD1.56 billion) as foreign investors continue to be cautious about returning in their droves despite the FX market liberalisation, as FX backlogs remain uncleared.
Elsewhere, local inflows rose further by 19.3% m/m to USD1.11 billion because of higher inflows from non-bank corporates (+35.7% m/m to USD597.10 million) and exporters (+2.3% m/m to USD448.00 million).
In the Forwards market, the naira depreciated at the 1-month (-4.5% to N7801.22/USD), 3-month (-4.3% to N820.24/USD), 6-month (-4.0% to N849.13/USD), and 1-year (-3.5% to N910.26/USD) contracts.
In the weeks ahead, we expect the re-introduction of the “willing buyer, willing seller” model at the IEW to influence the exchange rate direction.
The overnight (OVN) rate dipped by 75bps to 1.3% as the system remain afloat with liquidity.
Accordingly, average system liquidity remained at a net long position of N782.85 billion this week (vs N874.39 billion in the prior week).
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