Naira Ends Week With Gains Despite Slowing FX Reserves
The Nigerian Naira has shown some recovery, ending the week on a positive note even though gross reserves declined for the fourth consecutive week, decreasing by $219.56 million w/w to $37.71 billion as of June 20, data obtained from the Central Bank of Nigeria (CBN) show.
The naira gained N2 on Friday, appreciating from 1,549.41 on Thursday to 1,547.36, supported by increased supply from foreign portfolio investors who were looking to participate in the OMO auction, and CBN’s intervention of $61 million to banks.
Though the currency began the week with some gains, it depreciated for three straight days before budging on Friday as the apex bank’s support to the market paid off.
The local unit has continued to maintain stability even in the face of global pressures that have continued to rattle emerging markets’ currencies and slowing dollar inflows.
Analysts at Lagos-based Cordros Research said despite the continued stability of the naira, persistent global pressures, now intensified by renewed tensions in the Middle East, remain a downside risk.
“We expect the Central Bank of Nigeria (CBN) to manage short-term volatility through interventions during periods of market shocks,” the analysts wrote in a note on Friday.
In the forwards market, the naira rates appreciated across the 1-month (+0.2% to NGN1,579.78/USD), 3-month (+0.4% to NGN1,636.90/USD) contracts, while it decreased on the 1-year (-0.9% to NGN1,904.50/USD) contract. The rate closed flat on the 6-month contract.
Analysts say the exchange rates’ position is mixed due to the heightened tensions in the Middle East. While there are upsides in oil prices with Brent crude surging more than $74 per barrel with potentials to hit $80, the future of the currency seems bright.
