Nigeria’s forex reserves shed $47.3m, now $35.77 billion

Nigeria’s foreign exchange (forex) reserves dropped by $47.33 million to close weekend at $35.77 billion.

This was as Crude oil price declined by 4.4 per cent from $43.68bbl to $41.74bbl amid fears upsurge in COVID-19 cases might trigger a new wave of economic lockdowns.

This was Nigeria’s first forex decline in recent weeks at the weekend as dreary global crude oil prices, dollar recovery and domestic pressure on the controlled exchange rate heightened fears of further depreciation in naira.

Senior Research Analyst, FXTM, Lukman Otunuga, said oil prices would likely remain stuck around the $40 regions in the near term, especially If another round of possible lockdowns hit oil demand.

He noted that oil prices have continued to be heavily influenced by demand-side factors and the state of the global economy adding that a steady rebound by dollar may put pressure on naira and further exacerbated foreign-currency denominated portion of Nigeria’s public debt stocks.

The CBN has offered more than $200 million to the BDC segment since the resumption of forex sales to the segment. The CBN last week sold $100 million through the Secondary Market Intervention Sales (SMIS) Wholesale Window to boost liquidity levels and maintain stability in all segments of the market.

The naira closed flat across the official forex windows but suffered a marginal decline at the parallel market. At the Investors and Exporters (I & E) window, naira closed at N386.00 per dollar while CBN’s spot rate also closed at N379.00 per dollar.

At the parallel market, naira depreciated to N467.00 per dollar. Meanwhile, turnover at the I & E window dropped by 57.1 per cent to $348.8 million at the weekend, compared with $812.8 million recorded in the previous week.

Many analysts expected the naira to depreciate further, especially as dollar rebounded in the global market.

Analysts at Financial Derivatives Company (FDC) said the 100 basis points cut in Monetary Policy Rate last week amid rising inflation may worsen Nigeria’s currency management situation.

According to analysts, the imbalance could heighten the risk of capital flight, which will further increase the pace of external reserves depletion adding that Nigeria as an import-dependent economy stands the risk of higher import prices due to a stronger dollar.