SAT 23 APRIL, 2022-theGBJournal | Nigeria’s FX reserves increased by $59.99 million w/w to USD39.80 billion (20th April 2022), the second consecutive week of appreciation.
Analysts at Cordros Research say they believe the CBN has enough supply to continue support the FX market over the short term, given inflows from the recently issued Eurobond and the IMF’s SDR.
‘’However, foreign inflows are paramount for sustained FX liquidity over the medium term, in line with our expectation that accretion to the reserves will be weak given that crude oil production levels remain quite low,’’ Cordros said.
Meanwhile, the naira depreciated at the I&E window (IEW) by 0.2% to NGN418.33/USD but appreciated by 0.2% to NGN589/USD at the parallel market.
At the IEW, total turnover (as of 21st April 2022) declined by 4.3% WTD to USD556.21 million, with trades consummated within the NGN410.00 – NGN453.15/USD band.
In the Forwards market, the naira was flat at the 1-month (NGN418.11/USD) contract but appreciated at the 3-months (+0.1% to NGN423.46/USD), 6-months (+0.2% to NGN431.67/USD), and 1-year (+0.4% to NGN447.07/USD) contracts.
Thus, FPIs which have historically supported supply levels in the IEW (53.8% of FX inflows to the IEW in 2019FY) will be needed to sustain FX liquidity levels. Hence, we think further adjustments in the NGN/USD peg closer to its fair value and flexibility in the exchange rate would significantly attract foreign inflows back to the market.
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