Nigeria’s foreign exchange reserves increased week-on-week by 2.51 per cent to USD26.88 billion, according to latest update from the Central Bank of Nigeria, CBN, last weekend.

The latest uptick in the reserves came against the backdrop of a week-on-week decline in global crude oil price, a factor that had stoked the upswing in reserves in the past one month. Brent crude oil price and OPEC’s reference basket price moderated lower week-on-week by 1.39 per cent and 1.36 per cent to USD56.11 per barrel and USD52.30 a barrel, respectively, at the weekend.

But activities at the interbank foreign exchange market remained minimal even as more pressures came on the parallel market segment of the foreign exchange market, sending Naira value, at N497/ USD1, closer to the dreaded N500 mark.

This was despite indications by the Association of Bureau De Change operators to adopt N400.00/USD1 as BDC rate during a meeting with CBN a day before the latest depreciation.

However, in the Foreign Exchange Futures Market, the value of open contracts rose to US$3.8 billion from US$3.7 billion recorded in the first week of the year. It was observed that the value of the “soon-to-mature” Naira/USD January 25, 2017 dated contracts rose by US$58.3 million during the week.

Meanwhile exchange rates at the spot market for one month, three months, six months and 12 months forward contracts were stable at N305/USD, N305.25, N320.18/USD, N330.537/USD, N346.07/USD and N378/USD respectively
But analysts noted that despite the attractive prices of the contracts on offer, most of the contracts in the Futures market remained largely undersubscribed due to overhanging liquidity crisis in the currency market.

There was USD7.5 million intervention sales by CBN to banks during the week. In the current week, CBN will resume selling USD to BDCs for the first time this year; hence, we expect moderation of the Naira/USD exchange rate
Analysts expect exchange rate at the interbank to remain stable this week as the CBN continues daily intervention. Meanwhile, plans by the CBN to resume dollar sales to BDC operators may offset some of the pressure on exchange rates at the parallel market.

With last week’s depreciation amidst major moves by Central Bank of Nigeria, CBN, to assuage Bureau de Change, BDC, operators with improved availability of foreign exchange resources, some market operators believe the latest depreciation may be speculative, expecting a reversal this week.

Weekly foreign exchange supply

However, Financial Vanguard learnt that dealers are not confident in the arrangements under the International Money Transfer Agency system which the apex bank has been working out for some months now.

They said they are yet to receive foreign exchange supply under the arrangement this year, a situation which may have worsened the liquidity crises in the foreign exchange market while heightening speculations.

This situation was coming at the backdrop of the reduction in the volume of weekly foreign exchange supply to the interbank market by the CBN previous week.