SAT, 19 SEPT 2020-theGBJournal-Nigeria’s FX reserves grew by USD39.52 million w/w to USD35.81 billion, despite the CBN’s intervention across the various foreign exchange windows. Across the FX windows, the naira remained flat against the US dollar at NGN386.00/USD at the I&E window but weakened by 2.2% to NGN465.00/USD in the parallel market, as the market continues to doubt the CBN’s ability to meet up with existing demand.
In the Forwards market, the rates depreciated on the 6-month (-0.1% to NGN391.39/USD) and 1-year (-0.3% to NGN401.76/USD) contracts, while the 1-month (NGN386.78/USD) and 3-month (NGN388.47/USD) contracts were flat.
Despite the CBN’s stronger commitment towards exchange rate unification, we still see legroom for the currency to depreciate further in the medium-to-long term, at least towards its REER derived fair value. Our prognosis is hinged on the widening current account position, currency mispricing, which could induce speculative attacks on the naira, and the resumption of FX sales to the BDC segment of the market which should place an additional layer of pressure on the reserves.