SAT 20 FEB, 2021-theGBJournal- Nigeria’s FX reserves sustained its descent, as it dipped by USD177.39 million w/w to USD35.58 billion (16th February 2021).
The naira weakened against the US dollar by 1.3% to NGN410.00/USD at the I&E window and by 1.1% to NGN478.00/USD in the parallel market. At the I&E window, total turnover (as of 18th February 2021) decreased by 51.3% WTD to USD162.14 million, with most trades consummated within the NGN390.00 – 424.15/USD band.
In the Forwards market, the rate weakened across the 1-month (-1.5% to NGN413.96/USD), 3-month (-1.4% to NGN421.12/USD), 6-month (-1.0% to NGN429.29/USD) and 1-year (-0.3% to NGN443.14/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.
Our baseline expectation is that the CBN will depreciate the naira by 5.3% to NGN400/USD in the interbank market and 5.1% to NGN415/USD at the IEW.