External reserve sheds $57.8m in June

*As CBN issues N32bn debt to tighten liquidity

Nigeria’s external reserve fell to $30.27 billion as at June 29, as against $30.329 billion stood a month ago, representing a decline of $58 million, latest Central Bank of Nigeria (CBN) statistic showed over the weekend.

The apex bank, on Friday tightened liquidity in the money market through sales of N31.94 billion ($104.76 million) in treasury bills, selling N31.52 billion of 349-day treasury bill at 18.59 per cent and N440 million of 160-day treasury bill at 17.98 per cent at an auction.

In order to prop up the local currency, the central bank has been selling dollar on a weekly basis in the foreign exchange market, as the local currency closed three days trading week at N367 to a dollar as against N369 sold in earlier the week.

In the month under review, the foreign exchange rose to an estimated $798 million in three weeks of the month, making it $8 billion total injection since January 2017.

However, since the introduction of investors & exporters foreign exchange window, an estimated trading increase to $2.97 billion has been sold between April 28 and June 16, 2017.

An estimated $6 billion has been injected into the foreign exchange market in six months while the newly introduced exchange window has registered over $2 billion.

The CBN had injected $195 million to meet market demands last week and expected to inject another into the market this week, a follow up to over $800million that was injected into the inter-bank foreign exchange market in prior week.

Nigeria’s foreign exchange reserve stood at $30.25 billion by June 28, down 0.36 percent from a month ago, central bank data showed on Friday.

The reserves showed a 14.8 percent rise from a year ago, when they stood at $26.34 billion. Nigeria’s dollar reserves have risen slightly this year thanks to the rise in global oil prices.

The OPEC member country has added $4.2 billion to its reserves since the beginning of the year. Foreign reserves stood at $26.09 billion at the beginning of the year.

The data from the CBN showed that the nation’s foreign reserve has fallen from about $30.9 billion in May 2017 to $30.22 billion as at June 21, 2017.

Finance experts said that this may have contributed to the increase in Open Market Operations (OMO) auctions embarked upon by the CBN.

The CBN has been mopping up liquidity in the financial system believing that it will stabilize the naira.

Forex traders said cash balance in commercial lenders’ accounts with the central bank stood at 320.35 billion naira on Friday, boosted by the repayment of around 287.39 billion naira in matured treasury bills on Thursday.

“Interbank rate is at low level because the central bank sold fewer dollars this week (on the currency market),” one currency trader said.

Traders expect rates to remain flat next week unless the central bank decides to take advantage of the low rates to mop-up excess liquidity from the banking system.

However, the steady appreciation of the naira in the Nigeria Autonomous Foreign Exchange (NAFEX) window, also known as investors & exporters window will persist this week, with the NAFEX rate falling to N360 per dollar. Meanwhile, volume of transactions in the NAFEX window reached $2.5 billion two weeks ago $2.2 billion a weeks ago.

Since it was introduced on April 24 by the Financial Market Dealers Quote (FMDQ) as a reference rate for transactions in the window, the NAFEX rate had been on the downward trend. From a high of N379 per dollar on Friday, April 29, the NAFEX rate declined steadily to N362.16 per dollar at the close of business last week. This translated to N16.84 or 4.4 per cent appreciation of the naira in the NAFEX window.

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