External reserves shed $554m in Q1’21
By Babajide Komolafe & Elizabeth Adegbesan
The volume of dollars traded (turnover) in the Investors and Exporters (I&E) window of the foreign exchange (FOREX) market fell year-on-year (YoY) to $3.7 billion in the first quarter of this year (Q1’21) from $20.49 billion in Q1’2020.
However, while the YoY trend shows a huge decline, the Month-on-Month, MoM, trend in the first quarter of this year is showing a steady rise.
Financial Vanguard analysis of transactions in the window as published by FMDQ showed that on a monthly basis, the turnover stood at $906.44 million in January 2021 from where it rose by 43 percent to $1.3 billion in February. The upward trend continued in March rising by 15 percent to $1.5 billion.
On weekly details the transaction volume shows a consistent fluctuation over the quarter. In March the window traded $267.62 million in the first week, and the turnover rose by 63 percent to $435.5 million in the second week but down by 24 percent to $329.74 million in the third week.
However, turnover increased in the fourth week by three percent to $338.03 million and stood at $122.14 million in the last three days of March.
Meanwhile, naira appreciated by 53 kobo in the I&E trading window in March as the indicative exchange rate for the window dropped to N408.67 kobo per dollar on March 31st from N409.20 kobo per dollar on 1st of March.
External reserves drop
In a related development, the nation’s external reserves fell by $554 million in the first quarter of the year (Q1’21) to $34.82 billion at the end of March from $35.37 billion at the end of December last year.
Data from the Central Bank of Nigeria, CBN, shows that the reserves in January rose by $929 million or 2.6 per cent, month-on-month, m/m, to $36.3 billion from $35.37 billion in December, courtesy of rising crude oil price. The reserves however fell in February by $1.2 billion or 3.3 per cent, m/m, to $35.09 billion following increased dollar sales by the CBN. This trend persisted in March as the reserves fell again by $279 million or 0.7 per cent to $34.82 billion.
The marginal decline in March followed a two week upward trend in reserves, which commenced on March 18th from $34.42 billion $34.82 billion at end of the month, resulting in $37 million accretion in the reserves.