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By Chinwendu Obienyi
After fifteen consecutive weeks of decline, Nigeria’s FX reserves increased by $13.47 million to $36.95 billion following last week’s proceedings.
The nation’s FX reserves had remained flat at $39.96 billion in the preceding week with market experts stating that liquidity issues will remain over the short-to-medium term in the absence of any economic positive signal.
Despite the FX increase, the Naira depreciated by 1.1 per cent to N456.50/$1 at the I&E window (IEW). At the IEW, total turnover (as of 22 December 2022) declined by 19.3 per cent week-to-date (WTD) to $692.08 million, with trades consummated within the N435.00 – N472.98/$ band.
Furthermore, in the forwards market, the naira depreciated at the 1-month (-0.8 per cent to N468.95/$1), 3-month (-0.9 per cent to N475.22/$1), and 6-month (-1.2 per cent to N505.22/$1) contracts. Elsewhere, the naira appreciated at the 1-year (+1.7 per cent to N527.97/$1) contract.
Commenting on the development, Cordros Research in an emailed note to Daily Sun, said they believe the FX liquidity issues will remain over the short-to-medium term in the absence of any positive signal that denotes an improvement in FX supply relative to the pre-pandemic levels.
“Moreover, considering the tepid accretion to the reserves given low crude oil production and elevated PMS under-recovery costs, FPIs which have historically supported supply levels in the IEW will be needed to sustain FX liquidity levels in the medium to long-term. Hence, we think further adjustments in the Naira/Dollar peg closer to its fair value and flexibility in the exchange rate would significantly attract foreign inflows back to the market”, the note said.
