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FX WATCH: FX reserves drops by US$151.21 million w/w to US$34.44 billion as outflows outstrip inflows, naira sustains weakness

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By Audrey Lotechukwu

SAT 20 MARCH, 2021-theGBJournal- Nigeria’s FX reserves position sustained its decline, as outflows from the reserves outstripped inflows. Thus, it dipped by USD151.21 million w/w to USD34.44 billion (17th March 2021). The naira weakened by 0.2% to NGN410.00/USD at the I&E window (IEW) but traded flat at NGN485.00/USD in the parallel market.

At the IEW, total turnover (as of 18th March 2021) decreased by 24.3% WTD to USD329.74 million, with trades consummated within the NGN390.00 – 412.00/USD band. In the Forwards market, the rate was flat on the 1-month (+0.4% to NGN412.09/USD) contract, appreciated on the 3-month (+0.1% to NGN417.87/USD) contract and weakened on the 6-month (-0.2% to NGN426.18/USD) contract and 1-year (-0.1% to NGN442.45/USD) contract.

We expect improved liquidity in the IEW over the medium term, given the higher oil prices and an expected increase in crude oil production volume. Accordingly, we expect the naira to remain relatively range-bound (NGN410.00/USD – NGN415.00/USD) at the IEW.

Similarly, we believe the CBN will devalue the naira by 5.3% to NGN400.00/USD at the interbank market to narrow the gap with the IEW rate.-With Cordros Research

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