Foreign reserves gain $929.2m in 1 month amid improved global oil price
By Joshua Elekwachi, Abuja
The Central Bank of Nigeria (CBN) has said country’s foreign reserves gained $929.2million in January to $36.3 billion from $35.37billion it opened 2021.
The gain of foreign reserves in January, according to analysts was due to improved global oil prices that has boosted foreign exchange inflow into the country.
According to analysts the growth in foreign reserves is the reflective in global oil prices, partial global economic recovery amid optimism over the discovery and distributions of COVID-19 vaccines by most developed economies.
According to Organization of Petroleum Exporting Countries (OPEC), average basket price of crude oil closed January at $54.38/ barrel from $49.17/ barrel it closed in 2020.
Our correspondent gathered that the foreign exchange buffer has gained $180.5 million in three days to $36.12billion (February 3, 2021) from $36.3billion it closed in January.
Meanwhile, across the foreign exchange windows, the naira weakened against the dollar by 0.5per cent to N396.17 against the dollar at the Investors & Exporters Foreign Exchange (I&E) window but was flat at N480.00 against the dollar in the parallel market.
At the I&E window, total turnover (as at 4th February 2021) decreased by 23.4per cent WTD to $200.42 million, with most trades consummated within the N388.00 – 416.95/$ band.
Analysts at Cordros research added that, “Given the expected pressure on the external reserves amid weak portfolio inflows, we expect the naira to depreciate closer to its fair value implied by the long-run REER (N453.67) in the medium term.
“Our baseline expectation is that the CBN will depreciate the naira by 5.3per cent to N400/USD in the interbank market and 5.1per cent to N415/$ at the IEW.”
However, the overnight (OVN) rate expanded by 700basis points week-on-week to 18per cent as system liquidity (weekly average c. N224.52 billion) was squeezed by funding pressures for CRR debits, and the CBN’s weekly OMO (N71.66 billion) and FX auctions, amidst inflows from OMO maturities (N112.27 billion) and foreign exchange retail refunds.
“We expect liquidity to remain tight in the coming week, as expected inflows from OMO maturities (N213.87 billion) may not be sufficient to offset the outflows from the system. Thus, we expect the OVN rate to remain elevated,” they added.
They added that, “Proceedings in the Treasury bonds secondary market turned bullish, as investors took the double-digit yield level of some longer dated instruments, as a good re-entry point into the bond market.
“Consequently, average yield declined by seven basis points to eight per cent. Across the benchmark curve, market interest piqued on mid (-21bps) and long (-23bps) dated instruments, with major buying interests witnessed on the NOV-2029 (-21bps), JUL-2030 (-21bps) and MAR-2050 (-51bps) bonds.
“Conversely, the average yield expanded at the short (+13bps) end, as investors sold-off on the JAN-2022 (+72bps).
“As a result of the shock higher stop rates at this week’s OMO auction, we expect market participants to demand higher secondary market yields, especially for the longer dated instruments.
“In the longer term, we still expect yields in the bonds secondary market to temper, given the limited supply amidst significant inflows from CBN special bill maturities (c. N4.00 trillion) and FGN bond coupon payments (c. N500.00 billion).”
