Nigeria’s foreign reserves shed $311.24m in one week



Uba Group

Last week, Nigeria’s foreign reserves decreased by $311.24 million week- on- week to $36.08 billion as at March 51, 2023.

In the just-concluded week at the open market, the local currency edged the United States dollar as it appreciated by N1.00 or 0.13 percent, week on week to close at N751/USD from 752/USD in the previous week even as dollar demand took a calm and was supported by the Naira scarcity.

On the other hand, at the investors’ and exporters’ FX window, the naira depreciated slightly by 0.07 percent or N0.13 week on week to close at N461.83/USD as against the N461.50/USD in the prior week amid the growing FX demand pressure on the naira following the announcement on the use of the old banknotes.

On March 13, 2023, the CBN finally bowed to the Supreme Court order, stating that the old banknotes remain legal tender until December 31, 2023. In another development, FX scarcity continued across the board following the signal that Nigerian deposit money banks are set to cut PTA and BTA by 50 percent as the dollar crunch persists.

At the Interbank Foreign Exchange Forward Contracts market, the spot exchange rate remained unchanged at N462/USD.

Also, in analysis of the Naira/USD exchange rate in the weekly Naira FX Forward Contracts Markets, it was a mixed bag for the Naira index across all forward contracts, with appreciations reported for the 1-Month, 3-Month, and 6-Month, 6-Month tenor contracts against the greenback by +0.23 percent, +0.05 percent, and +0.54 percent week on week to close at contract offer prices of N465.63/USD, N481.90/USD, and N506.17/USD.

“Meanwhile the dollar hegemony was strong on the 2-Month and 12-Month contracts as it appreciated against the Naira by +0.05 percent and +1.11 percent to close the week at N474.20/USD, and N548.84/USD in that manner”

Meanwhile the dollar hegemony was strong on the 2-Month and 12-Month contracts as it appreciated against the Naira by +0.05 percent and +1.11 percent to close the week at N474.20/USD, and N548.84/USD in that manner.

In the oil market last week, the up and down movement of the oil price continued to drive volatility across markets as it rebounded a little to trade at $74.69 per barrel on the fear of recession in the midst of bank failures, soaring inflation across the globe, and tightened supply due to the Russia-Ukraine war that entered its first-year last week.

However, on the home front, the Bonny Light crude price react positively to factors playing in the oil market as it plummeted by 6.9 percent or (USD5.72), week on week, to close at USD77.68 per barrel on Thursday, down from USD83.40 per barrel last week. Next week, we expect the naira to trade in a relatively calm band across various market segments in the face of the Naira scarcity and as the Central Bank continues its weekly intervention in the foreign exchange market to shore up the value of the Naira.

At the money market, the CBN refinanced N161.87 billion of T-bills that matured via the primary market at lower rates for most maturities as investors continued to demand short-term government debt. Specifically, stop rates for 182-day and 364-day bills moderated to 5.00 percent (from 6.00%) and 9.49 percent (from 10.00%), respectively. However, the yield on 91-day bills rose to 2.66% (from 1.40%). Overall, demand improved from the last auction, as implied by a bid-to-cover ratio of 6.28x, as total subscriptions rose to 1.03 trillion (from 0.91 trillion at the last auction).

Elsewhere, Nigerian interbank Treasury bills’ true yields rose in the secondary markets. NITTY for 1 month, 3 months, 6 months, and 12 months rose w-w to 3.62 percent (from 2.8%), 4.7% (from 3.55%), 6.79 percent (from 4.35%), and 9.87 percent (from 5.87%), respectively.

Meanwhile, despite the relatively low value of matured OMO bills, NIBOR for overnight funds, 1 month, 3 months, and 6 months dropped to 11.11 percent (from 11.63%), 11.23 percent (from 11.38%), 11.98 percent (from 12.00%), and 12.95 percent (from 13.38%), respectively.