En­ergy com­modi­ties rout, fall­ing re­serves fail to desta­bilise naira

Business a.m. - - FINANCE & INVESTMENT -

EN ERGY PRICES per­sisted into the week as emerg­ing signs of oversupply, par­tic­u­larly, con­tinue to pres­sure oil prices down­wards; Brent Crude de­clined 7.2 per­cent W-o-W (as at the time of re­port­ing) from $66.76/b to $61.96/b.

Although de­clin­ing global oil prices should fun­da­men­tally sig­nal a de­val­u­a­tion of cur­rency in the hori­zon or at least a de­pre­ci­a­tion of ex­change rate at the “per­ceived mar­ket-re­flec­tive” I&E win­dow, the com­mit­ment of the CBN to the de­fence of the naira keeps pro­vid­ing sta­bil­ity for ex­change rates at dif­fer­ent seg­ments of the FX mar­ket.

Con­se­quently, Nige­ria’s ex­ter­nal re­serves, dur­ing the week, dropped to its 8-month low after shed­ding 27 ba­sis points W-o-W to set­tle at $41.5 bil­lion as at 21 Novem­ber, 2018; the cur­rency re­serves are down 13.1 per­cent June 2018 till date, fall­ing from a high of $47.8 bil­lion in the same pe­riod of 2017.

In the week, the CBN sold a to­tal of $210.00m at var­i­ous mar­ket seg­ments, in­clud­ing $100.00m sold at the whole­sale seg­ment, $55.00m at the SME seg­ment and an­other $55.00m of­fered at the in­vis­i­ble seg­ment (tu­ition fees, med­i­cal pay­ments as well as PTA and BTA).

Ac­cord­ingly, the CBN spot rate closed the week some­what flat at N306.75/$1.00 from N306.70/$1.00 in the prior week.

Sim­i­larly, the ex­change rate de­pre­ci­ated by 19 ba­sis points at the I&E win­dow to close at N364.70/$1.00 although ac­tiv­ity level im­proved sig­nif­i­cantly by 24.0 per­cent to $1.0bn from $0.8bn in the prior week.

At the par­al­lel mar­ket, the naira traded at N364.00/$1.00 through­out the week. How­ever, at the FMDQ OTC FX Fu­tures Mar­ket, the value of open con­tracts rose 0.4 per­cent W-o-W to $5.01bn from $5.00bn last week, with sig­nif­i­cant buy­ing in­ter­est no­ticed in the AUG 2019 in­stru­ment.

Whilst the re­cent down­side risk of cap­i­tal flow re­ver­sals is not an­tic­i­pated to dis­perse in the com­ing week, Afrin­vest an­a­lysts said the po­tency of the Apex Bank’s in­ter­ven­tion sup­plies to steady ex­change rates across ma­jor mar­ket seg­ments.

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