External Reserves Reverse Negative Trend, Rises To $35.7bn

The nation’s external reserves, last week, rose (though slightly) for the first time in 12 weeks, to $35.66 billion. Data from the Central Bank of Nigeria, CBN, shows that the reserves rose to $35.66 billion on Thursday last week, from $35.59 billion previous week. This represents the first week-on-week, WoW, increase in the external reserves since June 4, 2020, when it recorded WoW increase of $64 million.

The increase in reserves follows the four-week steady rise in the price of crude oil, which accounts for 90 percent of the nation’s dollar earnings. After falling steadily to less than $10 per barrel on April 21, 2020, from $71.98 per barrel on January 6, 2020, the price of Nigeria’s Bonny Light crude oil rose steadily to $44.3 on Monday, August 24, though it dropped to $42.93 last Friday.

But the declining fortunes of the nation’s currency, the Naira, in the parallel market persisted last week, in spite the announcement of resumption of dollar sales to Bureau de Changes (BDCs) operators by the Central Bank of Nigeria (CBN) on September 7, 2020. According to naijabdcs.com, the live exchange rate platform of the Association of Bureaux De Change Operators of Nigeria (ABCON), the parallel market exchange rose to N476.3 per dollar last week from N475 the previous week.

However, the naira appreciated by 33 kobo last week in the Investors and Exporters (I&E) window as the indicative exchange rate dropped to N385.67 per dollar at the close of business on Friday from N386 per dollar the previous week. The declining fortune of the Naira in the parallel market is expected to change next week while the huge gap (N90.63) between the parallel market exchange rate and the I&E exchange rate when the apex bank resumes sales of dollars to BDC operators.

According to analysts at Cowry Assets Management Company, “In the new week, we expect the widened disparity between different exchange rates to shrink, especially between I&E window (the autonomous window) and BDC segment, as CBN resumes the sale of dollars to BDC operators in the near future. “More so, given the renewed efforts by CBN to boost foreign currency supply and plug leakages, we expect to see Naira appreciate against the greenback in most market segments.”

– Vanguard.