The naira last week buckled under the weight of increased dollar demand, depreciatiating in both the parallel market and the Investors and Exporters (I&E) window, even as the nation’s external reserves declined further to $36.12 billion last week.
Data from the Central Bank of Nigeria (CBN) showed that the external reserves fell to $36.116 billion Wednesday last week from $36.395 billion Wednesday the previous week. This translated to a $279 million week-on-week (w/w) decline and it represents the second weekly decline in the reserves since December 17th.
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The decline according to analysts at Lagos based Afrinvest Securities Limited might not be unconnected to the recent repayment of a $500 million Eurobond instrument by the federal government.
Meanwhile the naira depreciated by N2.04 in the I&E window and by 30 kobo in the parallel market last week.
According to data from FMDQ, the indicative exchange rate of the I&E window rose to N396.17 per dollar last week from N394.13 per dollar the previous week, translating to N2.04 depreciation for the naira.
Similarly, the parallel market exchange rate, as provided by the naijabdcs.com, the live exchange rate platform of the Association of Bureaux De Change Operators of Nigeria (ABCON), rose to N477 per dollar last week from N476.7 per dollar the previous week. This translates to 30 kobo depreciation for the naira.
This trend according to Bismarck Rewane, Chief Executive Officer of Financial Derivatives Company, will persist till next month due to rising currency pressure.
Speaking at the monthly Lagos Business School Breakfast series, Rewane who is also a member of the Presidential Economic Advisory Council, noted that the combination of declining external reserves and rising dollar demand could prompt further depreciation of the naira to N410 per dollar in the I&E window.
He said: “Currency pressures will persist at both parallel market and I & E window on increased forex demand, increasing the likelihood of another currency adjustment to keep the I&E window & official exchange rates closer.
“Oil prices rose by 11% to $59 per barrel, year-to-date, ytd, while external reserves are down by 0.88% or $320 million to $36.2 billion since Jan 26. Based on this, the exchange rate (IEFX) could weaken to between N400 per dollar and N410 per dollar by March”.