The appreciation recorded by Nigeria’s currency- naira in the various segments of the foreign exchange market last week is expected to persist this week, even as the external reserves continued on a downward trend, falling by $177 million in two weeks.
This is due to increased dollar sales by the Central Bank of Nigeria, CBN, in its effort to stem the depreciation of the naira.
Last week, the naira appreciated in the parallel market and in the Investors and Exporters, I&E, courtesy of measures introduced by the apex bank to boost dollar supply.
Among other things the CBN increased dollar sales to each bureaux de change, BDCs, to $60,000 per week from $40,000, while it directed banks to sell dollars to all travellers with valid documents, customers and non-customers.
In addition the CBN intervened in the I&E window to boost supply in the window, while it sustained its weekly $210 million intervention in the interbank foreign exchange market.
Consequently, the naira appreciated by 72 kobo in the I&E window, as the indicative exchange rate dropped to N360.85 per dollar on Friday from N361.57 per dollar the previous week.
In the parallel market, the naira appreciated by N3 as the parallel market exchange rate fell to N363 per dollar on Friday from N366 per dollar the previous week.
According to the President, Association of Bureaux De Change Operators of Nigeria, ABCON, Aminu Gwadabe, the appreciation was due to fall in demand for dollars following the 50 percent increase in dollar sales to BDCs by the apex bank.
However, the external reserves declined for the second consecutive week reflecting the impact of increased dollar supply by the CBN.
Data on the CBN website showed that the reserves had declined by $177 million between May 18 when it peaked at $47.799 billion and Wednesday May 30 when it fell to $47.622 billion.
Analysts at Lagos based Cowry Asset Management Limited projected that the decline in external reserves will persist for a while due to increased dollar demand and CBN’s continued intervention to forestall depreciation of the naira.
“We expect the decline in the external reserves to persist in the short term as demand for the green back grows amid the continued intervention of CBN in order to curtail the pressure on the naira at both the I&E and BDC segments as well as the expected increased demand by pilgrims and other holiday travellers,” they said.