On the foreign exchange scene, the naira continued its downward trend in the foreign exchange market as it depreciated by an average of 50.5 kobo in the parallel market and in the Investors and Exporters (I&E) window last week.
While the naira depreciated for the sixth consecutive weeks by 51 kobo last week in the I&E window, it depreciated by 50 kobo in the parallel market.
Data from DMDQ showed that the indicative exchange rate for the I&E window rose for the sixth consecutive weeks to N364.57 per dollar last week from N364.06 per dollar the previous week, translating to 51 kobo depreciation.
Also, the exchange rate platform of the Association of Bureaux De Change Operators of Nigeria (ABCON) showed that the parallel market exchange rate rose to N360.5 per dollar last week from N360 per dollar the previous week.
Financial Vanguard analysis showed that the naira has been on the downward trend in the I&E window since November 15th when it closed at N362.58 per dollar. Since then, the naira has depreciated by N1.99 kobo against the dollar in the I&E window.
Furthermore, the naira has been on the downward trend in the parallel market since November 21st when it closed at N358 per dollar. Since then the naira has depreciated by N2.5 against the dollar in the parallel market.
The depreciation is driven by increased demand for dollars due to rising concerns over the six-month decline of the nation’s external reserves. While the downward trend in the external reserves is driven by lower revenue from oil, which accounts for about 90 percent of the nation’s dollar earnings, it is aggravated by increased dollar sales by the CBN in its bid to meet dollar demand by foreign investors exiting the nation’s fixed income market.
The declining trend persisted last week with the reserves closing at $38.775 billion on Tuesday, December 24th, representing a week-on-week decline of $250 million when compared with $39.035 billion on Tuesday, December 17th.