Nigeria’s external reserves have in one month accrued $1.12 billion on the back of the rally in oil prices and re-balancing of the Federal Government debt in favour of external borrowing, as the Investors’ and Exporters’ (I&E) foreign exchange window saw an inflow of $677.7 million last week.
The price of crude oil has maintained an upward movement in recent weeks selling at over $55 per barrel at the weekend as Nigeria was left out of the OPEC output cuts. This along with the restructuring of the government debt profile and the uptick in the country’s business activities has seen confidence grow stronger.
The naira has remained stable at the parallel market and the bureau de change window selling at N363 and N362 respectively for weeks in a row, while it hovers around N360 to the dollar at the I&E window which had seen a total of $1.09 billion inflow in October. At the parallel market however the value of the local currency ranged between N355 and N360 to the dollar.
The official rate, which is the rate at which the Central Bank of Nigeria(CBN) sells, however, closed weaker at N305.90 from N305.80 per dollar. The CBN had last week injected $195 million to meet demand. It has consistently intervened at the interbank market.
Despite its interventions, the external reserves continue to accrue, having grown by 3.4 per cent in in the last 30 days. From $32.74 billion which it was at the beginning of October, the reserves has grown to $33.86 billion as at November 1, 2017, the latest figure provided by the CBN.
In total, the reserves this year, the past 10 months has grown the reserves by 31.03 per cent or $8.019 billion from $25.84 which it closed last year. Analysts believe that with the improved outlook of the country, an increased inflow of foreign exchange through oil sales and foreign borrowings of the government, the external reserves will continue to remain at comfortable levels.
CBN deputy governor, Joseph Nnanna , had earlier noted that the reserves of the country is at a comfortable level. According to him, Nigeria can make do with a reserve level of $20 billion, “but it is the press that gives the impression that if the reserves fall below $30 billion then there is problem.
“No, there is no problem. All we need to manage the economy properly is a reserve that can cover at least three months of imports.
In fact, as it is, $10 billion or $12 billion can give us reserve coverage of four months,” he stated.
Meanwhile at the FMDQ Over-The-Counter (OTC) futures market, the total value of open contracts of the Naira settled OTC futures for the 12 instruments on the calendar stood at $2.9 billion as at Thursday November 2, 2017 from $3 billion the previous week. The APR 25 2018 remains the most subscribed instrument with a total value $591 million while the least subscribed is the May 30 2018 at $134.27 million.
Interbank rates at the money market this week, however trended lower on the first four trading days due to improved system liquidity attributable to Retail SMIS refund and OMO and Treasury Bills maturity which offset OMO mop-ups by the apex bank, although it spiked on Friday as banks provisioned for SMIS auction.