The pressure on the local currency which had received some breath following slight improvement in foreign reserve and oil prices may resurface as the development bounces back, BusinessDay findings revealed.
The foreign reserve which improved to $27.871 billion as at March 24, 2016 has declined further to $27.864 as at March 31, 2016 according to a data on the website of the Central Bank of Nigeria (CBN).
Also the price of Brent crude which rose to over $40 per barrel last week has declined to $38.63 per barrel as at April 01, 2016.
The foreign exchange market has for over three weeks witnessed exchange rate stability following recent contractionary monetary policyannouncements.
A report by Cowry Asset Management limited indicated that the Nigerian Naira appreciated against the U.S. dollar in all market segments. The local currency traded stable at the official clearing rate, interbank market rate, Bureaux De Change rate and parallel market rate closing at NGN197/USD, NGN199.10/USD, NGN320/USD and NGN323/USD respectively.
The stability was in spite of weekly decline in global crude oil prices witnessed in the review week – Opec’s reference basket price decreased w-o-w by 1.80 percent to USD34.33 a barrel while ICE Brent crude oil price softened w-o-w by 2.18 percent to USD39.57 a barrel as at Thursday.
Available data from Central Bank revealed Nigeria’s forex reserves fell w-o-w by 0.06 percent to USD27.86 billion as at Tuesday. Meanwhile, interbank forwards market indicated depreciation for most tenors save for the spot price which appreciated w-o-w by 0.22 percent to NGN198.11/USD.
“This week, we anticipate that the recent waning in external reserves may heighten currency risk to further add upward pressure on the NGN/USD exchange rate”, analysts at Cowry Asset said.
At the money market this week, the CBN will auction treasury bills worth N243.89 billion; viz: 91-day bills worth N55.40 billion; 182-day bills worth N25 billion; 182-day bills worth N33.49 billion and 364-day bills worth N130.00 billion. As a result of the expected outflows via auctions, the analysts anticipate pressure on liquidity and resultant increase in interbank rates.
