Naira Depreciates Despite Foreign Exchange Sales Resumption

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Against expectation, the Nigerian local currency, naira, depreciates despite the resumption of the apex bank weekly intervention foreign currency (FX) sales.

In the week, Brent crude oil price declined 9.5% week on week to $40.5 per barrel due to demand worries, higher inventory buildup and the second-wave of the coronavirus outbreaks.

Analysts at Afrinvest said they expect these factors to drive discussions at the next Organisation of the Petroleum Exporting Countries (OPEC) meeting on September 17, 2020.

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On the domestic front, the external reserves balance declined 1.3% week on week to $35.2 billion as at 09-09-2020.

In the foreign exchange market, the CBN spot rate remained flat over the week at ₦379.00/$1.00.

Meanwhile, at the parallel market, naira depreciated by ₦5.00 to close at ₦445.00/$1.00 due to what currency traders tagged continuous panic buy.

At the Investors’ & Exporters’ (I&E) Window, the national autonomous foreign exchange (NAFEX) rate gained 13kobo to close at ₦386.00/ $1.00.

So, activity level in the I&E Window increased by 11.7% to $240.8 million from the $215.6 million recorded in the previous week.

The total value of open contracts at the FMDQ Securities Exchange (SE) FX Futures Contract Market appreciated marginally by 0.5% ($62.9m) to $12.52 billion.

The September 2021 instrument at contract price of ₦423.90 received the highest subscription for the second consecutive week, up 21.0% ($70.0m) for a total value of $115.1m.

On the other hand, the JULY 2021 instrument at contract price of ₦417.96 recorded the least subscription at $1.0m with a total value of $121.95 billion.

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“We expect rates to remain range-bound across the different segments of the market in the week ahead”, Afrinvest stated.

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