After weeks of resilience the naira yesterday depreciated, joining the trail of emerging markets currencies that has in recent times suffered setbacks in value as the dollar gained strength.
The naira yesterday closed weaker at the Central Bank of Nigeria(CBN)’s window as well as the Investors and Exporters window.
From N362.78 to the dollar which the naira closed last week on the I&E window, it closed weaker at N363.11, while at the CBN window, it dropped to N306.25 from N306.2 which it traded earlier.
Currency traders said they expect the naira to follow the downward trend by emerging markets currencies this week.
According to Lukman Otunuga, a research analyst at FXTM , external influences may impact the Nigerian naira this week, as investors close eyes on any further turmoil with emerging market currencies after a very troublesome past couple of weeks.
“The naira may take some guidance from how investors view emerging markets generally, with particular attention being paid towards how the Lira reacts to the latest Turkish GDP reading and the general threat of further trade tariffs from U.S. president, Donald Trump.
“The indications from early Asian trading that both the Indian Rupee and South African Rand have resumed the week under weakness against the greenback suggests that buying sentiment towards those currencies belonging to markets with high account deficits remains limited. However, with Nigeria boasting a current account surplus, the naira may be slightly insulated from the brutal sell-off that has rattled emerging market currencies,” he stated.
The CBN has continued to intensify its effort to sustain liquidity of foreign exchange in the market by intervening with at least $210 million week on week to cater for requests in the wholesale segment of the forex market as well as for customers requesting invisibles such as tuition fees, medical payments and Basic travel Allowances (BTA).
This has seen the external reserves of the country decline in recent times dropping to $45.42 billion as at September 7, 2018, according to latest data by the apex bank. While year -to – date of the reserves is up by 16.7 per cent, it has dropped 5.2 per cent when compared to the highest level it achieved this year.
From $38.912 billion which it was as at January 2, 2018, the 30 days moving average of the external reserves hit its highest level in five years in May this year reaching $47.865 billion, a level it last achieved in April of 2013 when it was $47.9 billion.
It has however been on a slow but steady decline since June this year dropping by 5.2 per cent between May and September 2018. At the Bureau de Change (BDC) segment of the forex market, the naira remained stable at N359 consecutively for two weeks, while the euro continued to fluctuate between N312.5 and N313, the pounds sterling firmed at N478.
At the parallel market, the value of the naira against the dollar also remained stable selling at N359 to the greenback.