Foreign Exchange Market: Oil Prices Slide on Higher Inventories

Oil prices fell 11.1% w/w to $37.4/bbl. this week as crude oil inventories in the US rose faster by 4.3mbpd compared to consensus estimate of 1.2mbpd. On the domestic front, the external reserves inched higher marginally by 4bps w/w to $35.7bn (27/10/2020).

The domestic currency traded flat at the CBN spot market and the Investors’ & Exporters’ (I&E) Window at ₦379.00/$1.00 and ₦386.00/$1.00 respectively. At the parallel market, naira depreciated by ₦2.00 to close at ₦465.00/$1.00. Activity level in the I&E Window increased by 23.0% to $446.3m from $362.7m recorded in the previous week despite the 4 trading days.

The total value of open contracts of the naira at the FMDQ Securities Exchange (SE) FX Futures Contract Market declined 12.2% ($1.4bn) to $9.9bn due to the maturing October 2020 instrument. The OCT 2021 instrument (contract price: ₦420.05) received the highest subscription of $12.8m which took total value to $37.8m. On the other hand, the APR 2021 instrument (contract price: ₦403.02) recorded the least subscription worth $0.5m with a total value of $528.7m. We expect the exchange rates to remain range-bound at the official market and the I&E window.