Naira Depreciates As Gross External Reserves Decline

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Godwin EmefieleIn the Investors and Exporters foreign exchange window, the Nigerian naira depreciates across the currencies markets while data from the Central Bank of Nigeria shows that external reserves declined further.

Naira was sold at the official window at N429.63 to a United States dollar from N4238.13 as the volume of greenback transacted dropped. In the parallel market, due to a resurgence in demand for the greenback and other foreign currencies, the dollar worsened to N675, from N660.

The market experienced a moderate rise in demand from manufacturing and trade -Import and Export- sectors, according to analysts coupled with rising demand for travel allowances by Nigerians. Data obtained from the central bank shows that external reserves decreased by $166.49 million in the just concluded week to $38.88 billion.

Meanwhile, the total turnover or volume of dollars transacted in the Investors and Exporters window decreased by 38.0% from the beginning to $325.60 million on Thursday, with trades consummated within the N415.00 – N444.00 band.

According to data from FMDQ Exchange, the Nigerian Autonomous Foreign Exchange fixing (NAFEX) turnover increased by 20.7% or $12.3 million in the previous week to $71.9 million earlier in August.

The NAFEX window recorded an inflow of USD257.1 million with the CBN accounting for 6.8%, foreign portfolio investments (FPIs) accounting for 4.5%, non-bank corporates accounting for 27.9%, and exporters accounting for 46.4% and others accounting for 14.4%.

Elsewhere, at the Interbank Foreign Exchange market, the exchange rate closed flat at N430.00 for a United States dollar amid apex bank weekly injections of $210 million. Of the sum, $100 million was allocated to wholesale secondary market intervention sales (SMIS), $55 million was allocated to small and medium-scale enterprises and $55 million was sold for Invisibles.

Traders note showed that the Naira to dollar exchange rate traded mix as the 1-month, 2-month and 12-month foreign exchange forward contracts cleared higher by 0.05%, 0.06%, and 0.64% respectively to close the week at N429.51, N434.12 and N482.24 per greenback.

Meanwhile, the 3-month and 6-month forward contracts tapered by eight basis points and 194 basis points to close the week’s offering at N438.51 and N452.54 per the United States dollar.

Analysts expect the Naira to trade in a relatively calm manner band across all segments barring any significant market distortions as the CBN continues its weekly FX market interventions.

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