SAT 06 MARCH, 2021-theGBJournal- Nigeria’s FX reserves dipped by USD184.58 million w/w to USD34.92 billion (3rd March 2021) as the CBN maintained its interventions across the FX markets.
The naira weakened by 0.6% to NGN411.00/USD at the I&E window and appreciated by 0.4% to NGN480.00/USD in the parallel market.
At the I&E window, total turnover (as of 4th March 2021) decreased by 52.9% WTD to USD221.52 million, with trades consummated within the NGN381.00 – 427.45/USD band. In the Forwards market, the rate appreciated across the 1-month (+0.3% to NGN413.76/USD), 3-month (+0.2% to NGN420.33/USD), 6-month (+0.2% to NGN428.77/USD) and 1-year (+0.8% to NGN440.01/USD) contracts.
Given the expected pressure on the external reserves amid weak portfolio inflows, we expect the naira to depreciate closer to its fair value implied by the long-run REER (NGN453.67) in the medium term.
Baseline expectation is that the CBN will devalue the naira by 5.3% to NGN400/USD in the interbank market and 5.1% to NGN415/USD at the IEW.