Nigeria naira outlook positive this week on 5.1% rise in FX reserve levels, CBN interventions

The Nigerian naira is projected to trade positive this week on growing reserves and central bank continued intervention, according to Ecobank Research analysts.

At close of trade last week, the naira at N353.4/$ strengthened against the U.S dollar, a development, analysts at Ecobank Research say would continue this week.

Specifically, the Nigerian naira strengthened 0.6 percent last week at the interbank to N355.5/$, while it remained broadly stable at N357.91/$ at the Investors & Exporters (I&E) window as activity slowed down amid the Eid el Kabir public holiday.

The unification of the two segments has resulted in a convergence between the interbank and parallel market rates as against a 30 percent spread earlier in March before the creation of the I&E window.

On the run of play, FX reserve levels have continued their recent strengthening, up 5.1 percent since June to a two year high of $31.8bn buoyed by higher oil exports, bank TSA payments and relative strength in crude oil prices, which continued to hold above $50 per barrel of oil.

In the past months, the Nigerian central bank has maintained its tightening stance with elevated issuance of OMO and stabilisation ecurities and a

hawkish forward guidance with focus on curbing naira liquidity to reduce speculative dollar demand, which has bolstered fixed income yields in real terms to attract foreign portfolio investment (FPI) inflows.

The improving picture on the external balance, according to Ecobank Research analysts, is due mainly to higher oil exports, which supports of FPI inflows to naira assets via the flexible IE window.