Naira Falls As Reserves Fall To $38.8 Billion

Naira Falls As Reserves Fall To $38.8 Billion
Naira Falls As Reserves Fall To $38.8 Billion

The naira depreciated last week after reaching N640 to the dollar in the parallel market, as the country’s external reserves were depleted by $211 92 million in the first 11 days of August.

The reserves, which had risen to $39.444 billion as of July 18, 2022, had been on the decline since dropping to N39.093 billion on August 1st, 2022, before falling further to N38.881 billion on August 11th, 2022.

Across the markets, the naira fell by 0.3% at the Investors’ and Exporters’ window, where it sold for N429.63 to the dollar. On the parallel market, the naira fell 2.2% to N675 per dollar, widening the gap between the two markets by N246.

The I&E window saw a 38% drop in weekly turnover, which stood at $325.6 million as of Thursday last week, with trades consummated within the N415 and N444 to the dollar band.

The naira depreciated -0.1% to N429.51 and -0.6% to N482.24 to the dollar in the Forwards market, but appreciated 0.1% to N438.51 and 2.0% to N452.24 to the dollar in the 3-month and 6-month contracts, respectively.

Meanwhile, analysts predict that liquidity will remain tight this week due to the expected bond issuance. The August 2022 FGN Bond auction is expected to take place today, Monday, August 15, 2022, at the Debt Management Office (DMO).

According to Cordros Research analysts, the N100 billion inflow expected from OMO maturities may not be enough to offset the outflows from bond issuance as well as the CBN’s OMO and forex auctions.

The DMO will offer instruments worth N225.00 billion at the auction, including re-openings of the 13.53% FGN MAR 2025, 12.500% FGN APR 2032, and 13.0000% FGN JAN 2042 bonds. “However, we maintain our view that yields will rise further in the short term, given that the FGN’s borrowing plan for 2022FY and expected fiscal deficit point to an elevated supply.”