Forex sales by CBN scrape off $424.8m in foreign reserves

Forex sales by CBN scrape off $424.8m in foreign reserves

The Central Bank of Nigeria (CBN) has said the nation’s foreign reserves dropped by $424.8million in 10 days to $33.79 billion as at June 17, 2021 from $34.22 billion it commenced in June.

Nigeria’s foreign exchange buffer $33.79 billion is the lowest since October 2017 as the apex bank sustained intervention in key sectors of the economy.

Addressed the decline in external reserves,  the CBN Governor, Godwin Emefiele, had said during the last Monetary Policy Committee (MPC) meeting, that the drop reflects sales to the foreign exchange market and third-party payments.

In March, the reserves lost $178 million after dropping from $34.99 billion as of March 1 to $34.82 billion as of March 31.

In February, the reserves dropped by $1.1 billion, falling from $36.19 billion as of February 1 to $35.09 billion on February 26.

The CBN, in its January economic report, said, “As a consequence of the lower foreign exchange receipts, the official external reserves declined.

“Foreign reserves stood at $35.44bn at the end-January 2021, a decrease of 2.8 per cent and 3.5 per cent from $36.46 billion in December 2020 and $36.73 billion in January 2020.”

Meanwhile, the naira depreciated by 0.1per cent to N411.00 against the Dollar at the Investors & Exporters Foreign Exchange (I&E) window but appreciated by 0.8per cent to N498.00 against the Dollar at the parallel market.

At the I&EFX, total turnover (as of 17th June 2021) decreased by 22.3 per cent Week-Till-Date (WtD) to $490.88 million, with trades consummated within the N400.00 – 412.00 against the Dollar band.

The overnight rate contracted by 368basis points w/w to 19.3per cent as inflows from OMO maturities (N46.00 billion) saturated the system and limited the impact of outflows for NTB net issuances (N15.74 billion) and CBN’s weekly OMO (N17.30 billion) and FX auctions.

Meanwhile, the treasury bills secondary market performance traded bearish last week, as market participants remained on the sidelines anticipating renewed supply from the mid-week auctions amid tight system liquidity.

Consequently, average yields across all instruments expanded slightly by one basis point to 8.2 per cent. Across the market segments, the average yield at the OMO segment inched higher by two basis points to 9.7 per cent and similarly expanded by 14basis points to 6.5 per cent at the NTB segment.

CBN sold N17.30 billion worth of bills to market participants at this week’s OMO auction and maintained stop rates across the three tenors, as with previous auctions.

“We expect yields to trend higher in the coming week as local investors sell-off positions to meet funding requirements amid the tight liquidity management posture of the CBN,” analysts at Cordros Securities explained.