Nigeria’s foreign reserves rose 0.2 per cent month-to-date to $31.5 billion as at last week, representing a $200 million increase from the July record, which was put at $31.3 billion.
The increase was expected given the increased efforts of the Central Bank of Nigeria (CBN) to reduce speculative attacks on the local unit, according to Ayodeji Eboh, the Head of Afrinvest Securities Limited.
“CBN continues to dismiss calls to devalue the naira. We expect that the pressure in the parallel market may soften as the foreign exchange market remains closely watched by the apex bank,” he said.
The naira, however, traded flat at N199.10/$ week-on-week at the interbank foreign exchange market, while amount of dollars sold remained reasonably below level of demand despite autonomous sales by oil companies.
CBN’s intervention in the interbank market at N197/$ pushed the week-on-week performance to stability in the segment, with its support for the action of deposit money banks to reject dollar deposits from customers into their domiciliary accounts.
“This was in a bid to stop illicit financial flows in the Nigerian Banking system and reduce the level of dollarization of the economy, with the underlying notice that banks had large volumes of foreign currency in their vaults,” Eboh added.
However, volatility was prevalent in the parallel market last week as the local unit closed at N210/$ on Monday, depreciated to N228/$ on Tuesday, but rebounded to N215.00/$ on Wednesday on account of the $80 million dollar sale made by CBN to Bureau de Change operators which boosted liquidity and eased the pressure.
The gains were pared on Thursday as the local unit depreciated to N224/$ in the parallel market, but did not come as a shock given the rise in quantity supplied, which prepared a platform for increased speculative activities.
Generally, the naira appreciated 44 basis points week-to-date to close the week at N224/$.