Nigeria’s foreign exchange (FX) reserves halted their five-week accretion trend as the gross reserves level decreased by USD96.41 million week-on-week (w/w) to USD34.32 billion as of March 20. Meanwhile, the naira appreciated by 12.0% to NGN1,431.49/USD at the Nigerian Autonomous Foreign Exchange Market (NAFEM), supported by the Central Bank of Nigeria’s (CBN) interventions in the market totaling USD195.00 million over the week.
Total turnover at the NAFEM increased by 16.4% week-to-date (WTD) to USD1.21 billion, with trades occurring within the NGN1,300.00 – NGN1,640.00/USD band. In the Forwards market, the naira rates recorded appreciation across various contracts, including the 1-month, 3-month, 6-month, and 1-year contracts.
The CBN intensified its intervention in the FX market during the week, including the payment of the last portion of FX backlogs amounting to USD1.50 billion. Additionally, retail sales of US dollars to banks commenced within the range of NGN1,300.00/USD – NGN1,400.00/USD to boost confidence in the FX market and stabilize the naira.
While the CBN is expected to continue its FX intervention in the near term, a substantial increase in FX liquidity is not anticipated due to relatively weak FX reserves. However, reduced currency speculation and improved Foreign Portfolio Investment (FPI) inflows, driven by high naira yields, may continue to strengthen the local currency in the near term.
