Naira Appreciates Against the Greenback at Most FX Segments

In the just concluded week, Naira strengthened against the USD at the Bureau De Change and Parallel markets by 0.98% and 1.35% to close at N505.00/USD and N510.00/USD respectively despite the cessation of US dollars sales to BDCs.

The speedy appreciation of the Naira against the USD – which earlier touched N525/USD after CBN’s announcement – may have been caused by the expectation of foreign currency inflows from Eurobond issuance of USD6.2 billion and the anticipated USD3.4 billion SDRs (Special Drawing Rights) from IMF.

On the flip side, Naira weakened against the USD at the Investors & Exporters market by 0.01% to close at N411.50/USD. Meanwhile, NGN/USD exchange rate closed flat at N380.69/USD at the Interbank Foreign Exchange market amid weekly injections of USD210 million by CBN into the forex market: USD100 million was allocated to Wholesale Secondary Market Intervention Sales (SMIS), USD55 million was allocated to Small and Medium Scale Enterprises and USD55 million was sold for invisible.

Elsewhere, the Naira/USD exchange rate depreciated for most of the foreign exchange forward contracts: 1 month, 2 months, 3 months, 6 months and 12 months exchange rates fell by 0.32%, 0.37%, 0.49%, 0.46% and 0.30% to close at N412.36/USD, N414.01/USD, N415.73/USD, N422.08/USD and N435.10/USD respectively. However, the spot rate remained flat at N379.00/USD.

In the new week, on the back of the anticipated USD inflow and recent accretion to the external reserves – fx reserves rose w-o-w by 0.48% to close at USD33.5 billion –, we expect Naira to further strengthen against the greenback at most FX segments, especially at the parallel market.