Reserves stable at $26 billion, naira falls further

Currency loses at Interbank, parallel markets
Interbank lending high on N416b T-bills’ auction

The foreign exchange reserves have lost $2.97 billion since this year from combined challenges of low earnings and interventions in defense of the local currency.

However, it has recorded a relative stability at $26 billion market since May 2016, more than at other months of the year, with marginal gains and losses, as a result of policy options, improved earnings and demand pressure on the other hand.

Starting from January, the reserves lost $810 million from $28.97 billion; $340 million to $27.82 in February; and gained $40 million in March.

In April, it resumed the sliding profile, losing $780 million; $700 million in May, to $26.38 billion; $20 million in June; and $160 million in July.

From June to date, reserves’ depletion has moderated due to the introduction of the flexible exchange rate policy, which reduced speculations and volume of spot dollar-purchase, through the foreign exchange forwards market.

Similarly the, the local currency sustained its loss at the parallel market, exchanging for N400 per dollar at the weekend.

On the official interbank market, the naira ended weaker at N318.91 per dollar, after trades worth $12.63 million.

The naira dropped continuously at unofficial market last week after opening at 381 on Monday, riding on the back of assessed dollar demand from individuals travelling abroad for their summer holidays.

Already, the Central Bank of Nigeria (CBN)has directed international money transfer operators to pay dollar proceeds from transfers into local commercial banks in naira, while selling the dollars themselves to bureaux de change outlets.

The bank hopes the move will help narrow the gulf between the official and black market rates and boost dollar liquidity, traders say.
Some past suppliers of dollars, including oil firms, are now selling some of their hard currency directly to petrol importers under an arrangement with the government, draining supply at the market and pressing the reserves.

Besides, the noted that banks, which act as agents of some international money transfer operators are yet to comply with the directive from the Central Bank of Nigeria, that instructed them to sell foreign currency remittances to licensed bureau de change operators.

Meanwhile, cumulative monetary policy actions of CBN worth N415.5 billion, last week, kept money supply in check, as interbank lending rates remained trended higher.

The treasury bills auction, which was conducted twice, had withdrawn N170.3 billion earlier in the week, while the second auction sterilized another N245.2 billion.

Consequently, interbank lending rates- Open Buy Back and Overnight, which started the week at less than 12 per cent, ended higher at 19.5 and 20.6 per cent respectively, through steady progression in all the trading days.

The first auctioned instruments were the 353-day and 185-day bills at marginal rates of 18.5 per cent and 18 per cent.

The second auctioned instruments were the 91-day, 182-day and 364-day securities at stop rates of 15.4 per cent, 18.1 per cent and 18.5 per cent, which were also twice oversubscribed.