High dollar demand to put more pressure on naira this week

Analysts see no hope for naira this week as they anticipate sustained pressure on the foreign exchange market against the backdrop of high dollar demand from end users as well as falling foreign exchange reserves. The external reserves declined to $34.33 billion as at January 29, 2015 from $34.37 billion January 28, 2015. Naira last week de- clined in value by 1.47% (or N3.00) at the bureau de change segment to N207.00/USD while it depreciated by 1.45% (or N3.00) to N210.00/USD at the parallel (‘black’) market segment, according to a report by Cowry Asset Management Limited. At its Retail Dutch Auc- tion System (RDAS), the Central Bank of Nigeria (CBN) offered USD500 mil- lion but sold USD484.98 million, a 29.82% increase over the USD373.59 mil- lion sold the previous week. Consequently, the USD/naira exchange rate held steady at N168.00/ USD. Meanwhile, oil majors and NNPC sold USD350 million and USD80 mil- lion, respectively, to local lenders. Royal Dutch Shell also sold an undisclosed amount of dollars. Hence, the local currency appreci- ated by 0.57% (or N1.08) to N189.10/USD at the inter- bank foreign exchange market. On the other hand, in- terest rates may increase following expected strain in system liquidity as combined funds demand for purchase of treasury bills and foreign exchange would exceed inflows from treasury bills ma- turities. The apex bank will auc- tion N192.40 billion via the primary market, viz: 9-day bills worth N45.18 billion; 182-day bills worth N30 billion and 364-day bills worth N117.22 bil- lion while an equivalent amount of treasury bills will mature on Thursday, February 05, 2015. Last week, 140-day treasury bills worth N234.67 billion matured via open market opera- tions. However, Nigerian Interbank Offered Rates (NIBOR) increased across most placement tenors. NI- BOR for 1 month, 3 months and 6 month tenor buck- ets increased to 13.73% (from 13.56%), 15.09% (from 14.81%) and 16.10% (from 15.71%). However, overnight funds moderated to 9.25% (from 11.08%).