Forex injections: External reserves shed over $2bn in one month Press "Enter" to skip to content

Forex injections: External reserves shed over $2bn in one month

…Gain $8.083bn in one year, CBN lifts FX market with $547.16m, CNY56.17m in one week
…Investors FX segment records $1.128bn turnover in 5 days.
The nation’s external reserves, which is managed by the Central Bank of Nigeria (CBN) has reduced by the total sum of $2.079 billion in just one month, checks by The Daily Times revealed.

The latest statistics obtained from the official website of the CBN over the weekend showed that the foreign exchange buffer steadied at $41. 946 billion as at Thursday, November 1, 2018, against $44.025 billion stood on Tuesday, October 2, this year.

The reserves, however, gained whopping sum of $8.083 billion in one year, comparing the standing figure of $41.946 billion to $33.862 billion stood in the corresponding month in 2017.

Although, analysts believed that the increase in the reserves was due to steady hike in global oil prices, it has been on a downward trend for the fourth consecutive week, as brent declined from a 2018 high of $86.74 in early October amid growing concern over a possible slowdown in global growth.

But in our checks, we observed that the foreign exchange trading at the Investors and Exporters Foreign Exchange (I &E) FX window on the first and second trading days of the just-concluded week, recorded low transactions turnover of $102.28 million, which was $51.14 million on each day.

The special FX window turnover, however, improved significantly to $397.57 million on Wednesday, and also traded the same value on Thursday before declining to $231.24 million on the last trading of the week.

It is, however, worthy of note that the improvement declared in I&E FX turnover was after the apex had lifted the inter-bank foreign exchange market with the sum of $210million as an intervention on Tuesday to meet the requests of foreign exchange customers.

The apex bank, also, injected its first intervention in the inter-bank foreign market in November with the sum of $337.16million in the retail Secondary Market Intervention Sales (SMIS) in addition to CNY 56.17million in.

For the $210million FX intervention, the apex explained that authorized dealers in the wholesale segment of the inter-bank foreign exchange market received the sum of $100million, allocated the sum of $55million each to the Small and Medium Enterprises (SMEs) and the invisible segments, comprising requests for tuition fees, medical payments and Basic Travel Allowance (BTA), among others.

But the CBN’s Director, Corporate Communications, Isaac Okorafor, on Friday, explained that the intervention was for requests in the agricultural and raw materials sectors.

The Chinese Yuan, on the other hand, was for Renminbi-denominated Letters of Credit.

The CBN spokesman said that the market had continued to enjoy stability owing to the regular interventions by the Bank, which he said had also guaranteed a stable exchange rate for the Naira.

Continuing, Okorafor assured that the CBN Management would remain committed to ensuring that all the sectors of the forex market continue to enjoy access to the needed foreign exchange.

Meanwhile, $1 exchanged for N362 at the Bureau de Change (BDC) segment of the foreign exchange market, while CNY1 exchanged for N54.

Analysts at Cordros Capital said, “Despite the continued decline in the foreign reserves, our outlook for the foreign exchange market remains stable, as oil prices remain at comfortable levels and production remains stable, aiding inflow of oil revenues.

That, together with the prospect of $2.8 billion Eurobond will provide the apex bank sufficient legroom to sustain its foreign exchange interventions through the rest of the year.”

Nevertheless, oil prices have been on the decline mode in the recent time, just as rising crude supply met the bearish combination of concern over global growth and weak equity markets, as the U.S-China trade dispute heats up and hits emerging market economies in particular.

For instance, Russia is pumping oil at a post-Soviet high, U.S. crude output has topped 11 million barrels a day and according to a Reuters survey of OPEC production, the group more than made up for any declines in Iranian shipments in October.

Brent crude futures LCOc1 were down 79 cents at $74.25 a barrel, while U.S. futures CLc1 fell 53 cents to $64.78 a barrel.

“Given these output numbers, with Russia pumping hard and the United States and OPEC as well, and we are not seeing a pickup in demand for another month … it could indicate we’re back to the good old $70-80 range that persisted through April and August,” Ole Hansen Saxo Bank senior manager said.

An agency survey during the week under review showed that the Organisation of Petroleum Exporting Countries raised oil production last month to its highest since 2016, led with gains by the United Arab Emirates and Libya.

Brent and U.S. crude posted their most significant monthly percentage decline since July 2016 in October, with Brent down 8.8 percent for the month and U.S. crude losing nearly 11 per cent.

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