Rise in crude oil prices fails to reflect on naira, foreign reserves

Despite the 5.1 per cent rise in Brent crude oil price last week, foreign reserves shed $10.9 million or 0.3 per cent of its value, while the naira depreciated by N10 last week at the parallel market.
Last week, Brent crude oil price rose 5.1 per cent week-on-week (w/w) to $69.76 per barrel l as expectations that reopening economies and higher travel numbers in the US and Europe would boost fuel demand outweighed concerns about the coronavirus spread in parts of Asia. On the domestic front, external reserves fell 0.3 per cent w/w ($110.9 million) to $34.3 billion from $34.4 billion the previous week.
At the parallel market, rates opened at N486.00/$mand closed ₦495.00/$, depreciating N10.00 w/w. At the Investors’ & Exporters’ (I&E) Window, the NAFEX rate opened the week at N411.00/$ to close at N412.00/$ on Friday, with little change from previous week. Activity level in the I&E Window rose 101.0 per cent to $1.3 billion from $624.9 million recorded in the previous week.
At the FMDQ Securities Exchange (SE) FX Futures Contract Market, the total value of open contracts of the Naira settled at $4.0bn, down 17.0 per cent ($808.1 million) from the prior week. This was due to the maturity of the MAY 2021 instrument despite new subscription in the JUN 2023 (contract price: N479.79) and DEC 2023 (contract price: N500.80) instruments. The MAY 2022 (contract price: N436.48) instrument received the most buying interest in the week with additional subscription of $22.3m which took total value to $43.8 million. On the other hand, the FEB 2022 instrument (contract price: N432.17) was the least subscribed, with an additional subscription of $5.0 million for a total value of $481.1 million.
At the start of the week, Open Buy Back (OBB) and the Overnight (OVN) rates fell 1.5ppts and 1.8ppts to settle at 15.0 per cent and 15.3 per cent respectively from the previous Friday as system liquidity closed at N486.5 billion. By the end of the week, the rates closed at 18.7 per cent and 19.2 per cent, down 2.2ppts and 3.0ppts w/w.

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