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FX WATCH: Naira ends worst week at N502/US$ as concerns linger over policy, external reserves drops US$23.22 million w/w to US$34.22 billion


SAT 05 JUNE, 2021-theGBJournal- Lingering concerns about Nigeria-in spite of a more stable tone for the economy-and further weakness in foreign exchange inflows has kept markets on edge, with uncertainty surrounding the security adding to cautious tone.

By the end of the week, the local currency was down by 1.4% to NGN502.00/USD at the parallel market, after it opened the week trading at N493/$.

Last week, the Naira made its worst five day start to a year on record, falling nearly 4 %.

At the Investors & Exporters window (IEW), the Central Bank of Nigeria (CBN) has managed to keep rate reasonable while struggling to keep market liquid.

The naira appreciated by 0.3% to NGN410.75/USD. At the IEW, total turnover (as of 3rd June 2021) decreased by 59.6% WTD to USD535.38 million, with trades consummated within the NGN400.00 – 420.47/USD band.

In the Forwards market, the rate was flat across the 1-month (NGN413.54/USD), 3-month (NGN420.34/USD) and 6-month (NGN429.34/USD) contracts, but depreciated on the 1-year (-0.1% to NGN448.02/USD) contract.

Analysts at Cordros Research say they 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.’’

Meanwhile, Nigeria’s FX reserves sustained its decline, dipping USD23.22 million w/w to USD34.22 billion (1st June 2021), following trend witnessed in May when external reserves depleted by $640 million-dropping from $34.88bn as of April 28 to $34.24bn on May 28 (CBN).

In March, the reserve dropped$178m after dropping from $34.99bn as of March 1 to $34.82bn as of the end of March 31, on the back of dwindled forex inflows.

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