The value of the naira weakened to N430 to the dollar at the Investors’ and Exporters’(I&E) window as the external reserves of the country sustained its accretion last week. Foreign reserves rose by $75 million during the week to $39.43 billion as at July 14, 2022.
At the parallel market, the value of the naira likewise weakened from N616 which it was selling at the beginning of the week to sell at N618 to the dollar by close of business on Friday. At the I&E window, the value of the local currency had depreciated as the turnover at the market dropped.
Compared to N424 to the dollar which the currency closed the previous week, by close of business on Friday, the value of the naira had dropped to N430.33 to the dollar. Turnover at the market as of 14 July 2022 decreased by 73.2 per cent to $149.07 million, with trades consummated within the N411.42 – N444 per dollar band.
In the Forwards market, the rate was flat at the 1-month which was N427.37 per dollar contract, but weakened at the 6-month by -0.1 per cent to N449.55 per dollar and 1-year by -0.2 per cent to N472.81 per dollar contracts. The rate appreciated at the 3-year by 0.1 per cent to N435.17 per dollar.
According to analysts at Cordros Research, dollar shortages have persisted given limited foreign exchange supply at the official channels amidst increased forex demand underpinned by summer travels and political activities.
“We understand that travellers and manufacturers have continued to recourse to the parallel market as most of their forex needs remain unmet at the official windows. Consequently, since the last policy meeting, the local currency depreciated by 1.3 per cent apiece to N424.63 and N617 to the dollar at the IEW and parallel, respectively, as of 14 July.
“Meanwhile, inflows to the Investors and Exporters Window (IEW) improved as the CBN’s non-oil export proceeds repatriation rebate scheme appears to be bearing fruit. Specifically, total inflows to the IEW rose by 62 per cent month on month to $1.84 billion in June compared to May figure of $1.14 billion, its highest level since December 2021 when it was $2.42 billion though still significantly below the Q1-20 monthly average of $3.68 billion.
“The improvement was primarily due to a 70.3 per cent month on month increase in inflows from local players representing 88.4 per cent of total inflows. Notably, we highlight that inflows from exporters (193.7 per cent m/m to $1.02 billion) rose to their highest level since the CBN created the IEW, reflecting the impact of the CBN’s rebate scheme to attract non-oil exports.
“We highlight that inflows from foreign investors remain tepid relative to the pre-pandemic level, reflective of forex liquidity challenges and an overvalued currency,” he said.