The Central Bank of Nigeria (CBN) has disclosed that it foreign exchange reserves dropped by $539.3 million in January amidst its intervention in strengthen the naira against other currencies.
It was gathered that the nation’s foreign reserves opened the year at $38.60 billion and closed January 30, 2020 at $38.06 billion.
In January, there was war threat between USA/Iran, leading to the global oil prices to trade unstable.
Analysts had predicted that the global oil price tends to hits the $80 per barrel mark this year when the US attacked top Iranian General, Qasem Soleimani in Baghdad.
However, the foreign reserves last week declined by $114.38 million to USD38.10 billion (29th Jan 2019) as the CBN maintained its support for the currency through its weekly foreign exchange interventions, through which $210.00 million were sold across the different segments of the foreign exchange market.
Despite this, the naira weakened by 0.3 per cent w/w at the Investors & Exporters (I&E) window to N363.97 against the dollar but strengthened by 0.5per cent to N360.00 against the dollar in the parallel market.
“Despite the rate of decline in foreign exchange reserves, which has heightened fears regarding the possibility of a currency devaluation, we estimate that the CBN will be able to sustain its naira defense through H1-20, at least,” a group of analysts at Cordros capital explained.
Meanwhile, the overnight (OVN) rate undulated during the week before closing 11ppts higher, week-on-week (wow), at 15.3per cent, on lower system liquidity. The average liquidity level for last week settled at N306.23 billion (vs. N575.80 billion in the previous week) as outflows from the Open Market Operation (OMO) auction (N210.29 billion), Cash Reserve Ratio (CRR) debits (N120 billion) and foreign exchange auctions outweighed inflows from OMO maturities (N514.05 billion).
Consequently, activities in the Treasury bills market were bearish, as banks sold off assets to provide funding for CRR debits.
Consequently, the average yield across instruments expanded by 60basis points to 10.15per cent. In the NTB segment of the market, the average yield expanded by 21basis points to 3.7per cent, similarly, the average yield in the OMO segment of the market also expanded by 36basis points to 13.2per cent.