External reserves shed $539.3m in January

…CBN will be able to sustain its Naira defence through H1-2020 – Analysts

Amidst the Central Bank of Nigeria (CBN) continuous interventions in the foreign exchange market, so as to strengthen the naira against other foreign currencies, the external reserves has reduced by $539.3 million in January.

The reserves, which is monitored by the apex bank stood at $38.60 billion at the beginning of the year but dropped to $38.06 billion as of the end of January 2020.

In the just-concluded week alone, the foreign reserves last declined by $114.38 million to $38.10 billion (29th Jan 2019) as the CBN maintained its support for the currency through its weekly foreign exchange interventions, through which $210.00 million were sold across the different segments of the foreign exchange market.

“Despite the rate of decline in foreign exchange reserves, which has heightened fears regarding the possibility of a currency devaluation, we estimate that the CBN will be able to sustain its naira defence through H1-20, at least,” a group of analysts at Cordros capital explained.

Meanwhile, the naira weakened by 0.3 per cent w/w at the Investors & Exporters (I&E) window to N363.97 against the dollar but strengthened by 0.5per cent to N360.00 against the dollar in the parallel market.

Also, the overnight (OVN) rate undulated during the week before closing 11ppts higher, week-on-week (wow), at 15.3per cent, on lower system liquidity.

The average liquidity level for last week settled at N306.23 billion (vs. N575.80 billion in the previous week) as outflows from the Open Market Operation (OMO) auction (N210.29 billion), Cash Reserve Ratio (CRR) debits (N120 billion) and foreign exchange auctions outweighed inflows from OMO maturities (N514.05 billion).

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Consequently, activities in the Treasury bills was bearish, as banks sold off assets to provide funding for CRR debits.

Consequently, the average yield across instruments expanded by 60basis points to 10.15per cent. In the NTB segment of the market, the average yield expanded by 21basis points to 3.7per cent, similarly, the average yield in the OMO segment of the market also expanded by 36basis points to 13.2 per cent.