SAT 22 MAY, 2021-theGBJournal- Nigeria’s FX reserves position sustained its decline, as outflows from the reserves outstripped inflows. Thus, it dipped by USD102.51 million w/w to USD34.40 billion (18th May 2021).
The naira depreciated by 0.1% to NGN412.00/USD and 0.2% to NGN485.00/USD at the I&E window (IEW) and the parallel market, respectively.
At the IEW, total turnover (as of 20th May 2021) increased by 26.1% WTD to USD421.46 million, with trades consummated within the NGN386.00 – 421.00/USD band.
In the Forwards market, the rate weakened across the 1-month (-0.1% to NGN413.34/USD), 3-month (-0.1% to NGN419.14/USD), 6-month (-0.1% to NGN428.15/USD) contracts and stayed flat in the 1-year (NGN445.42/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.