SAT 15 MAY, 2021-theGBJournal- Nigeria’s FX reserves sustained its decline for the fourth consecutive week, as it dipped by USD111.56 million w/w to USD34.61 billion (14th May 2021).
The naira depreciated by 0.3% to NGN411.67/USD and by 0.2% to NGN484.00/USD at the I&E window (IEW) and parallel market, respectively. At the IEW, total turnover (as of 11th May 2021) decreased by 72.0% WTD to USD130.93 million, with trades consummated within the NGN395.00 – 420.23/USD band.
In the Forwards market, the rate weakened across the 1-month (-0.1% to NGN413.06/USD), 3-month (-0.1% to NGN418.97/USD), 6-month (-0.1% to NGN427.67/USD) and 1-year (-0.1% to NGN445.50/USD) contracts.
We expect improved liquidity in the IEW over the medium term, given 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.