In the just concluded week, Naira shed weight against the USD at the Investors and Exporters window, Bureau De Change market and the parallel (‘black’) market by 1.32%, 1.50% and 1.06% to close at N410.00/USD, N474.00/USD and N478.00/USD respectively.
However, 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.
Meanwhile, despite the sustained rise in Brent crude oil prices, the external reserves fell w-o-w by 0.92% to USD35.47 billion as of Thursday, February 18, 2021.
Hence, the Naira/USD exchange rate weakened for all of the foreign exchange forward contracts: 1 month, 2 months, 3 months, 6 months and 12 months rates rose by 1.50%, 1.59%, 1.42% and 0.96% and 0.27% respectively to close at N413.96/USD, N418.21/USD, N421.12/USD, N429.29/USD and N443.14/USD. Meanwhile, the spot rate remained flattish at N379.00/USD.
In the new week, in spite of CBN’s attempt to re-engage foreign portfolio investors by higher interest rates, we expect Naira/USD to depreciate further at the I&E FX Window given the pressure on the external reserves and with forwarding fx rates being priced higher.