Nigeria’s external reserves recorded an increase of $424.68 million between August 30 and September 10, 2024, highlighting an improved financial outlook for the country.
Data sourced from the Central Bank of Nigeria showed the rise in the country’s foreign exchange reserves.
The reserves, crucial for stabilising the naira, financing imports, and managing external obligations, rose from $36.305 billion on August 30 to $36.730 billion by September 10, 2024, representing a 1.17 percent increase over the 11 days.
Week-on-week, FX reserves recorded accretion, as the gross reserves level increased by $337.89 million w/w to $36.73 billion (10 September), possibly reflecting inflows from the proceeds (c. USD900.00 million) of the recently concluded domestic FGN US Dollar bond.
Following the CBN’s intervention of c.USD 121.00 million during the week, the naira appreciated by 3.0 percent w/w to N1, 546.41/USD at the Nigerian Autonomous Foreign Exchange Market (NAFEM), undermining the CBN’s intervention of c.USD 121.00 million during the week.
Total turnover at the NAFEM as of 12 September decreased by 15.7 percent WTD to $980.92 million, with trades consummated within the N1, 499.00/USD – N1, 668.00/USD band. In the forwards market, the naira rate decreased across the 1-month (-0.5% to NGN1, 668.65/USD) and 3-month (-0.2% to N1, 738.23/USD) contracts, but increased across the 6-month (+0.2% to N1, 838.87/USD) and 1-year (+1.1% to N2, 052.05/USD) contracts.
The naira is likely to remain under pressure despite recent efforts by the CBN to stabilize the currency.
Analysts at Cordros Research said market demand may continue to outweigh supply given the CBN’s mild intervention and weak FPI inflows.
However, a slight dip to $36.244 billion was recorded on September 2, representing a minor decline of $61m. This was followed by a recovery, with the reserves rising to $36.274 billion on September 3, reflecting a gain of $30 million.
A further analysis of the report indicated that on September 4, the reserves had returned to their August 30 level, reaching $36.304 billion.
The positive trend continued on September 5, as the reserves climbed to $36.337 billion, representing an increase of $33 million.
A more substantial gain occurred on September 6, with reserves growing by $55 million to $36.392 billion.
The most significant jump in the reserves was seen between September 6 and September 9, when the reserves surged by $250 million to reach $36.642 billion. This upward movement persisted on September 10, with reserves further increasing by $88m to $36.730 billion.
The apex bank attributed the growth to the evolution of the foreign exchange market in Nigeria, changing patterns of international trade, institutional changes in the economy, and structural shifts in production.
“The reserves, crucial for stabilising the naira, financing imports, and managing external obligations, rose from $36.305 billion on August 30 to $36.730 billion by September 10, 2024, representing a 1.17 percent increase over the 11 days.”
Previously, Nigeria’s foreign exchange reserves dipped by $342.97 million to $36.53 billion in nine days, according to data from the Central Bank of Nigeria.
The decline in the country’s foreign exchange reserves comes amid the recent sale of $876.26 million to meet demands from importers and other users through the Retail Dutch Auction System.
Additionally, Nigeria’s first-ever foreign-currency domestic bond has secured $900 million in subscriptions.
Meanwhile, activities in the money market last week showed that overnight (OVN) rate inched higher by 7bps w/w to 31.7 percent despite the inflow from OMO maturities (N35.20 billion).
Consequently, the average liquidity position remained positive, closing at a net long position of N612.68 billion (vs net long position of N198.32 billion in the previous week).
Trading in the Treasury bills secondary market was bearish this week following profit-taking activities on short- and long-dated bills. Thus, the average yield across all instruments expanded by 79bps to 21.6 percent.
Across the market segments, the average yield expanded by 62bps to 20.3 percent at the NTB segment and increased by 92bps to 23.6 percent at the OMO segment. At the NTB auction, the DMO offered maturing bills worth N161.88 billion – N6.78 billion for the 91-day, N4.92 billion for the 182-day and N150.18 billion for the 364-day bills.
The subscription level settled lower at N563.17 billion (previous auction: N1.13 trillion), with a bid-to-offer ratio of 3.5x recorded.
The auction closed with the DMO allotting instruments worth NGN161.88 billion – N10.84 billion for the 91-day, N2.52 billion for the 182-day, and N148.52 billion for the 364-day papers – at respective stop rates of 16.63 percent (previous: 17.00%), 17.00 percent (previous: 18.94%) and 18.59 percent (previous: 18.94%).
