Interbank FX rate averages N294.73/$ on low naira liquidity

The raising of N245.18 billion ($773.44 million) worth of Treasury Bills (TBs) with maturities ranging between three months and a year on Wednesday, created a dearth of the local currency, leading to its appreciation over the dollar at the interbank foreign exchange market, BusinessDay investigations show.

The CBN yesterday issued N45.18 billion  in three-month bills, N80 billion  of six-month papers and N120 billion of one-year bills in the primary market auction, which was aimed at settling short term obligations.

Despite non intervention by CBN, Nigeria’s FX interbank market was said to be awash with dollar liquidity following an intraday record of $49.158million worth of trade on Wednesday.

Consequently, FX interbank dealers traded the greenback at an average spot rate of N294.73/USD and a high of N318/USD in 34 deals. The local currency which opened to trade at N317/USD gained N6.5 to close at N310.50/USD, data at the FMDQ showed.

Also in different deals, interbank FX spot dealers traded a cumulative $15 million at N309.50/USD; while $3.5million dollars were traded in different deals at N310/USD.

BusinessDay further gathered that the appreciation, which is part of a deliberate effort by the CBN to manage the local currency, was also as a result the fact that a handful of oil companies supplied the greenback at yesterday’s trading without the intervention of the apex bank which had been the major supplier.

The CBN, yesterday issued N45.18 billion  in three-month bills, N80 billion of six-month papers and N120 billion of one-year bills in a primary market  auction, for the settlement of short term obligations.

Kunle Ezun, analyst at Ecobank Nigeria, told BusinessDay that the appreciation of the naira in yesterday’s trading could be as a result of dollar sales by some oil companies “as the CBN which has been a major supplier did not intervene at the market.

“The Nigerian Treasury Bills (NTBs) have been repriced across the tenors with average T-Bill rate at about 18 percent, a fallout of the MPR hike to 14 percent.

“A long dated 12-month instrument currently yields about 23percent. It appears the money market will be a great destination for investors,” Azeez Bello, a financial analyst at Arthur Steven Asset Management Limited said yesterday in an emailed response.

“The core developments of the past quarter have been the devaluation in June and the monetary tightening in July. The second was designed to make the first effective, and its message to foreign investors could be paraphrased as “welcome back, all is forgiven,’” said+ the Gregory Kronsten-led team of analysts at Lagos-based FBNQuest.

“These are bold steps by the authorities: bolder will be required in our view in the form of further rate hikes if the FX market is to attract sizeable autonomous flows and the exchange rate is to settle” FBNQuest analysts added.

The price of oil, Nigeria’s major source of petrodollar revenue edged up in early trading on Wednesday, supported by a weaker dollar. Brent crude was up 11 cents a barrel at $41.91.

Iheanyi Nwachukwu & Hope Moses-Ashike