Naira depreciates, foreign reserves rises

By Elizabeth Adegbesan

The foreign exchange segment of Nigeria’s external sector is presently in a divergent performance as the local currency depreciates further against world’s major currencies while its external reserves appreciated.

The Naira depreciated against the dollar  in both the parallel market and Investors and Exporters (I&E) window last week even as the country’s foreign reserves gained $300 million during the week.

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In the parallel market, the Naira recorded sharp depreciation of N15 as the parallel market exchange rate rose to N545 for a United States Dollar on Friday from N530 recorded in the previous week.

In the I&E window, the Naira depreciated by N1.33 kobo as the indicative exchange rate dropped to N412/ $1 on Friday from N410.67 / $1 in the previous week.

Foreign Reserves rise

Meanwhile, data from the Central Bank of Nigeria (CBN) showed that the nation’s foreign reserves gained $300 million   as the gross amount   rose to $34.8 billion on Friday from $34.5 billion the previous week.

Moreover, the liquid amount grew by $500 million to $34.5 billion on Friday from $34 billion the previous week.

The apex bank said the $250.8  million difference represented a  ‘blocked’ amount.

Commenting on the external sector positions, analysts at United Capital Management PLC in their investment views for the week stated: “The outlook for the Naira is dependent on the success of the Eurobond  issuance as well as the performance of crude oil price. We expect the  Eurobond issuance to achieve a decent level of success which would help  strengthen the exchange rate and consequently the Naira.  

“Overall, our outlook for the currency market remains positive given the aforementioned  factors, coupled with the expected positive impact of the  International Monetary Fund’s Special Drawing Rights (SDR) allocation depending on when the  economic authorities decide to drawdown.”