Naira to strengthen on back of external reserves improvement

Naira is expected to appreciate this week follow¬ing noticeable improvement in the external reserves and the willingness by the monetary authorities to maintain stability, analysts have said.

External reserves as at April 3, 2014 rose by 0.03 percent to $37.86 billion compared to $37.851 as at April 2, 2014.

In line with the expecta¬tion of analysts at Cowry Asset Management Limited, the official foreign exchange market saw stability of the NGN/USD exchange rate at N155.74 in the out-gone week following interven¬tion by CBN.

At its bi-weekly Re¬tail Dutch Auction, the banking regulator offered USD800.00 million but sold only USD654.55 million to end-users, an amount 18.09% less than the vol¬ume sold in the preceding week. The local currency also appreciated in other market segments follow¬ing boost in dollar sup¬ply – local subsidiary of ExxonMobil sold USD50 million while Royal Dutch Shell sold an undisclosed amount to dealing banks on Monday. At the inter-bank market, the naira gained 0.54% (or N0.89) to N164.01/USD. The local currency also appreciated against the greenback at both the bureau de change and parallel (or ‘black’) by 0.58% (or N1.00) and 0.84% (or N1.45) to close at N170.00 and N171.55, respectively.

Also, inter-bank rates are expected to moderate this week following treasury bills worth N319.92 billion which will mature via Open Market Operation (OMO) and Primary Market, viz: 91-day bills worth N20.16 billion; 147-day bills worth N136.27 billion; 182-day bills worth N43.49 billion; and 364-day bills worth N120.00 billion.

However, the Central Bank of Nigeria (CBN) will auction treasury bills worth N183.65 billion, viz: 91-day bills worth N20.16 billion; 182-day bills worth N43.49 billion; and 364-day bills worth N120.00 billion on Wednesday, April 9, 2014.

Last week, Nigerian Inter-Bank Offered Rates held steady for all but 7 days NIBOR which rose to 11.00% from 10.96%. Treasury bills worth 174.73 billion matured via Open Market Operations and consisted of 132-day bills worth N47.65 billion; 161-day bills worth N59.92 billion; and 168-day bills worth N67.16 billion. The inflows were virtually counterbalanced by with¬drawals through sold bills worth N160.00 billion, viz: 134-day bills worth N50.00 billion; 114-day bills worth N50.00 billion; 115-day bills worth N30.00 billion; and 136-day bills worth N30.00 billion. Hence, NIBOR for call, 30 days, 60 days and 90 days closed flat at 10.75%, 11.37%, 11.71% and 11.96%, respectively.

The CBN last week un¬veiled details of economic output in five major sectors of the economy in Q4 2013. Provisional data showed that the 7.72% growth of Africa’s second largest real Gross Domestic Product (GDP) in Q4 2013 was partic¬ularly driven by increased contribution and growth of the industrial sector from 16.53% and 1.56%, respec-tively, in Q3 2014 to 19.26% and 3.37%, respectively in Q4 2014.