Forex: External reserves dip as Naira closes at N855/$1 at black market

By Temitope Adebayo

Foreign exchange reserves monitored by the Central Bank of Nigeria (CBN) recorded a slight drop to standing at $37.295 billion, while the exchange rate between the naira and the US dollar improved by 2.29 per cent at the black market on Tuesday, trading at an average of N855/$1, compared to an average of N875/$1 recorded in the previous trading session.

The current apex bank statistics showed that the reserves as of 7th November 2022 stood at $37.295 from $37,363 billion recorded Friday 4th, November 2022.

Although, the Friday external reserve figure of $37.3658 billion was a rare upward movement, gaining 0.001 when compared to $37.3656 recorded as of the previous day.

However, the Naira struggles to retain value in the Investors’ and Exporters’ FX window after it suffered massive devaluation due to spurious demand for the dollar in the unofficial forex market.

The exchange rate at the official market closed at N445.5/$1, the same rate recorded on the previous trading day, DailytimesNGR gathered.

The opening indicative rate closed at N444.08/$1, an exchange rate of N461/$1 was the highest rate recorded during intra-day trading before it settled at N445.5/$1, while it traded as low as N439.98/$1 during intra-day trading.

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The monetary authority has maintained a no-devaluation policy position on the local currency while playing an intervention game at the FX market to ensure the naira holds strong.

Latest data from the CBN website indicates that Nigeria has $37.3 billion as gross external reserves covering some 10-months imports bills following despite higher crude oil prices in the global market.

At the beginning of the second half of 2022, data from the CBN indicates that gross external reserves printed at $39.173 billion – recording about $2 billion decline in four months –excluding inflows from oil exports in the period.

Meanwhile, the Central Bank has tried to put up efforts to drive dollar inflows. However, these have not impacted the exchange rate markets – both official and unofficial.

Last week, there were riotous currency trading activities in the parallel market amidst a plan to redesign the naira. A large volume came from the ‘blue sky’ where it was stashed away by some criminal elements in the country.

As a result, there were pressures on exchange rates, this time, not due to allowable, and productive demand for foreign currencies but for certain individual selfish interests.

For Nigeria, the weakening currency has further inflated the cost of foreign currency debt payments. This will impact the 2023 budget amidst a record level of fiscal slippage in the country.

Down by 0.2 per cent last week, the Nigerian Autonomous foreign exchange fixing (NAFEX) rate traded within the range of N424.0-447 per the United States dollar but closed at N445.50, according to analysts’ notes.

In the parallel market, the Naira closed at an average of N870, thus the gap between the NAFEX and parallel market rates was above 95 per cent, according to Coronation Research note.

Meanwhile, the average yield on the Federal Government of Nigeria, FGN, and debt instruments inched higher to 14.6 per cent amidst the ongoing yield repricing in the fixed income space.

While inflation and falling naira remain downside, the market still awaits fresh catalysts that will force an upward movement in the yield curve and close the existing gap in real return.

As liquidity position in the money market Stabilises, which is an improvement from October 2022 record levels, short-term rates continues to stay in the single-digit range, according to data from FMDQ Exchange.

Analysts’ reports indicated that system liquidity improved primarily due to the combination of FAAC disbursement from the prior week and inflows from OMO maturities.

For instance, the overnight lending rate was unchanged at 8.8 per cent on the first traday of the week, as system liquidity settled at a net long position of N351.13 billion.

In its market report, Coronation Research expects rates in the money market to trend upwards.

It said projected inflow from Nigerian Treasury bills and OMO bill maturities as well as an FX retail auction refund may not be sufficient to offset potential combined outflow from an FX auction, OMO auction, and possible CRR debit by the Central Bank of Nigeria this week.