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Naira Weakens on More Demand for Dollar, Declining Reserves

By Dipo Olowookere

The continuous increase in demand for the greenback by foreign portfolio investors (FPIs) weakened the local currency at the foreign exchange (forex) market last week.

It was observed that the Naira did not perform well at the various market segments despite the intervention of the Central Bank of Nigeria (CBN) by providing the sum of $210 million to authorised dealers at the interbank market last Tuesday.

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The apex bank had supplied the sum of $100 million to the Wholesale segment, while $55 million were each given to dealers at the Small and Medium Scale Enterprises and the invisibles to cater for BTA, medicals, school fees and others.

But at the close of the week on Friday, the local currency depreciated at the interbank forex market to N361.34 to the Dollar.

Also, the local currency went down by 0.07 percent week-on-week (w-o-w) against the Dollar at the Investors & Exporters Forex Window (I&E FXW) to quote at N363.92/$.

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However, the local currency remained unchanged against the Dollar at both the Bureau De Change (BDC) segment and the parallel market at N358/$ and N361/$ respectively.

Meanwhile, according to analysts at Cowry Asset, most dated foreign exchange rate forward contracts at the interbank over-the-counter (OTC) segment rose amid declining external reserves: 1-month, 2-month, 6-month and 1-year contracts lost 0.15 percent, 0.11 percent, 0.08 percent and 1.04 percent to close N367.14/$, N370.44/$, N384.59/$ and N414.47/$ respectively.

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Business Post reports that the Africa’s largest economy’s foreign reserves depreciated by 0.99 percent w-o-w to $44.381 billion as at Thursday, September 27, 2018, according to data harvested from the website of the CBN.

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Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan.

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