The issue is that it is not coming from an official source it is coming from alternative supply, from those who had access to dollars but had no commercial transaction need.
Nigerias external reserves declined by 4.75 percent to 35.43 billion as of April 12, 2023 from 37.20 billion on January 12, data from the Central Bank of Nigeria (CBN) show.
For Muda Yusuf, chief executive officer of the Centre for the Promotion of Private Enterprise, it is possible that there are positive expectations that after the end of the current administration, the naira may begin to perform better. So in order not to lose money, it is better to quickly sell now.
Because if you have a new administration and new forex policy that is better, it could bring down the exchange rate.
So what they are doing is basically selling the dollars in the market, and that amount of dollars coming to the market is beyond average commercial need so you will see some level of appreciation until it is exhausted.
The reality is that our foreign reserves are declining.
I think it is driven by expectations, he said.
At the Investors and Exporters forex window, the dollar was quoted at the rate of N462.83/1 as against N463.67/1, data from the FMDQ indicated.
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Most currency dealers who participated at the foreign exchange market auction on Thursday maintained bids between N460.00 (low) and N466.00 (high) per dollar.
The daily forex market turnover increased by 54.16 percent to 131.33 million on Thursday from 85.19 million on Wednesday.
The local currency lost 3.8 percent of its value against the dollar in one month, falling from N737/ at the beginning of the year to close at N755/ in February 2023.
This was fuelled by heightened uncertainty as naira cash crunch bit hard, Bismarck Rewane, managing director/chief executive officer of Financial Derivatives Company Limited, said in a report.
According to Rewane, Nigerias sources of forex remain weak due to suboptimal oil production induced by oil theft, capital flow reversal owing to global monetary tightening and exchange rate premium at the parallel market.
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Official naira is expected to fall to N500 per dollar as Nigerias external reserves, which stood at 37.21 billion as of January 17, 2023, is projected to decline to 34.9 billion at the end of 2023, according to the Nigerian Economic Summit Group.
The decline in the official forex reserves will be driven by the CBNs intervention in the forex market and shortage in forex inflow at the end of 2023.
In 2022, the countrys external reserves declined by 8.2 percent to 37.1 billion from 40.5 billion at the start of the year.
At the money market segment on Thursday, the overnight rate remained unchanged at 19.00 percent, while the open repo rate increased by 0.04 percent to close at 18.67 percent compared to 18.63 percent on the previous day, a report by FSDH research said.
The Nigeria Treasury bill secondary market closed on a flat note on Thursday with the average yield across the curve closing flat at 8.08 percent on Thursday, as average yields across shortterm, mediumterm, and longterm maturities remained unchanged at 4.03 percent, 6.93 percent, and 10.29 percent, respectively.
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