Naira up despite 10.95% drop in liquidity at official market

Naira, Nigeria’s currency on Thursday appreciated by 0.25 percent despite a drop in liquidity at the official foreign exchange market, known as the Investors and Exporters (I&E) forex window.

There was low activity at the I&E window as the daily foreign exchange market turnover declined by 10.95 percent on Thursday to $110.22 million from $123.78 million recorded on Wednesday, data from the FMDQ indicated.

After trading on Thursday, the dollar was quoted at the rate of N428.12/$ as against N429.20 quoted on Wednesday at the official market.

Most currency dealers who participated in the FX auction maintained bids between N415.00 (low) and N444.00 (high) per dollar.

In the parallel market popularly called the black market, the local currency reversed the previous gains as the dollar was sold for N655 on Thursday compared to N640 sold on the previous day.

“There is demand in the market today, I think that is the reason why the dollar has gone up again,” a trader told BusinessDay.

The local currency had last week peaked at the rate of N710 per dollar following increased demand at the black market as the banks could not meet the genuine demand for forex by end users due to shortage of dollars at the official market.

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At the money market on Thursday the Overnight (O/N) rate remained unchanged at 15.00 percent, while the Open Repo (OPR) rate increased by 0.17 percent to close at 14.67 percent compared to 14.50 percent on the previous day, according to a report by FSDH Research.

The Nigerian Treasury bills secondary market closed on a flat note on Thursday with the average yield across the curve closing flat at 6.56 percent. Average yield across short-term, medium-term, and long-term maturities remained unchanged at 9.16 percent, 5.86 percent, and 6.32 percent, respectively.

The Open Market Operation (OMO) bills secondary market closed on a negative note on Thursday, as the average yield across the curve cleared higher by 46 bps to close at 10.29 percent from 9.83 percent on the previous day. Average yield across the long-term maturities expanded by 77 bps. However, the average yield across short-term maturities declined by 1 basis point. OMO 21-Feb-23 (+231 bps) maturity bill witnessed heavy selling pressure, while OMO 16-Aug-22 (-1 basis point) maturity bill witnessed mild buying interest.

According to the report, FGN bonds secondary market closed on a mildly negative note on Thursday, as the average bond yield across the curve cleared higher by 2 bps to close at 12.54 percent from 12.52 percent on the previous day. Average yield across the short tenor of the curve expanded by 11 bps. However, average yields across the medium tenor and long tenor of the curve remained unchanged.

The 14-MAR-2024 maturity bond was the worst performer with an increase in the yield of 21 bps. Furthermore, the secondary bond market is likely to remain subdued in the short term.