Naira stables as external reserves hike by $1.26bn in 3 months

…CBN lifts forex market with $247.8m, CNY 34.8m

Motolani Oseni

The Nigerian currency, Naira, at the close of trading activities for the week on Friday, remained steady against the dollar at the official and unofficial foreign exchange segments, even as the nation’s external reserves increased by $1.26 billion in the first quarter of 2019.

The Daily Times checks showed that the naira stabled at N307 per dollar at the Central Bank of Nigeria (CBN) official rate, but opened at an appreciable rate of N360.25 to the dollar, gaining 0.01 per cent at the investors’ FX segment, before depreciating marginally to close N360.33.

The foreign reserves, however, stood at $43.17 billion as of end to close March 30, 2019, at $44.43 billion, representing an increase of $1.26 billion or 2.9 per cent.

A quick check at the historical foreign reserve data shows that Nigeria’s foreign reserve recorded value above the $44.1 billion marks in September 2018, representing an increased to an all-time high in six months.

A breakdown of the increase in the reserves showed that it added $4.2 million or 0.10 per cent to close at $43.174 billion in January 2019, from $43.17 billion it closed for 2018.

In February, the foreign exchange buffer depreciated by $873.34 million or 2.02 per cent to $42.29 billion from $43.17 billion whilst in the third month, March, it appreciated significantly by $2.1 billion or 4.99 per cent to $44.43 billion from $42.3 billion it opened in March.

Experts attributed an increase in CBN’s foreign reserves to a steady increase in global oil prices and increase inflow from the diaspora.

The Organisation of Petroleum Exporting Countries (OPEC) basket price appreciated by $15.09 or 28.9 per cent to $67.23 per barrel from $52.14 per barrel in January.

The Monetary Policy Committee (MPC) members had noted with satisfaction, the continued stability in the foreign exchange market at the Investors’ and Exporters’ (I&E) window of the market.

In particular, it also observed the moderate improvement in oil prices and stable accretion to foreign reserves, which stood at $45.2 billion as at March 21, 2019, a 6.73 per cent increase from $42.35 billion at end-February 2019.

The committee chaired by CBN governor, Mr. Godwin Emefiele, commended the recent upsurge in capital inflows into the economy, noting this to be a demonstration of sustained confidence by the foreign investor community in the nation’s economy.

Speaking at the end of the second MPC meeting held in Abuja recently, Emefiele said, “the committee was, however, not unmindful of developments in the global economy”, noting the recent slowdown in growth in some advanced economies and the dovish stance of some major central banks as an early warning sign of broader macroeconomic vulnerabilities.

He explained in his communiqué further that, “It, therefore, underscored the need to monitor the trend in capital flows and the continued downturn in the equities market, noting that the recent surge in portfolio inflows was concentrated in the money market.

“The Committee noted the relative volatility in oil prices and its impact on accretion to reserves which could easily undermine the stability observed in the foreign exchange market.

It, however, noted that current developments in the oil futures market indicate that oil prices will remain considerably above the Federal Government’s 2019 budget benchmark,” Emefiele said

Meanwhile, the apex bank on last Friday made an intervention of $247.8 million in the retail Secondary Market Intervention Sales (SMIS) and CNY 34.8 million in the spot and short tenored forwards segment of the inter-bank foreign market.

This was disclosed by the Director, Corporate Communications Department, Mr. Isaac Okorafor, who revealed that the intervention was for requests in the agricultural and raw materials sector. The Chinese Yuan, on the other hand, was for Renminbi-denominated letters of credit.

Okorafor further expressed satisfaction over the continued stability of the foreign exchange which, according to him, was largely due to sustained intervention by the Bank.

He assured that the apex Bank management would remain committed to ensuring that all the sectors of the foreign exchange market continue to enjoy access to the needed foreign exchange.

Consequently, the naira appreciated by 0.11per cent to $360.30 at the Investors &Exporters foreign exchange window but was flat in the parallel segment.

At the interbank market of the CBN, the Naira depreciated by 0.02per cent to close at N307 against the Dollar on Friday.

Elsewhere, total turnover at the Investors &Exporters foreign exchange window moderated by 9.9per cent to $1.09 billion with 89.19per cent of trades executed within the N360-N369/Dollar band.

“Looking ahead, we expect the naira to remain firm in the medium to short term, as the still elevated crude price rally continues to underpin higher oil receipts, thereby supporting the CBN’s continued intervention.

In addition, the recent deluge of portfolio inflow further supports our view of currency stability,” analysts at Cordros Capital explained at the weekend.