• Friday, July 19, 2024
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Naira pressure at parallel market as banks comply with CBN’s policy

The pressure on the naira may be more noticeable at the parallel market while dollar supply would be stifled at the inter-bank market this week as deposit money banks comply with the policy of the Central Bank of Nigeria (CBN).
The apex bank had in its policy mandated banks to maintain a zero balance on their foreign exchange trading position.
Analysts at Cowry Asset Management Limited said the apex bank’s policy will further stifle dollar supply at inter-bank market and create more pressure on the naira particularly at the parallel market.
Last week, in its first twice-weekly sale of foreign exchnage, the CBN offered USD400 million but sold USD629.40 million (N105.74 billion) at the Retail Dutch Auction (RDAS). Consequently, the USD/Naira exchange rate held steady at N168/USD. At the interbank market, the local currency strengthened by 2.48% to N180.25/USD – well beyond the official band limit of N168/USD ± 5 amid undisclosed dollar sales by major oil companies to lenders. The Naira also strengthened by 0.26% at the parallel market to 190.50/USD. At the Bureau De Change market segment, the Naira remained constant relative to dollar at N189.50/USD.
This week at the money market, in the absence of major outflows, inter-bank rates are expected to moderate following treasury bills worth N196.32 billion which will mature via Open Market Operation (OMO0 for 133- day bills worth N115.27 billion and 136 day bills worth N81.05 billion.
Last week, treasury bills worth N394.48 were auctioned – N156.40 billion via the primary market (91- day bills worth N20.15 billion, 182- day bills worth N50.40 billion and 364- day bills worth N85.85 billion). In addition, 133-day bills worth N185.18 billion and 157-day bills worth N55.90 billion were sold via open market operations. However, treasury bills worth N405.72 billion matured – N156.40 via the primary market (91-day bills worth N20.15 billion, 182- day bills worth N50.40 billion and 364- day bills worth N85.85 billion). Another, 136-day bills worth N249.32 billion matured via open market operations. Consequently, Inflows more than offset outflows hence Nigerian Interbank Offered Rates for the overnight, 1 month, 3 months and 6 month tenors moderated, respectively, to 9.91% (from 10.96%), 13.81% (from 14.52%), 14.25% (from 15.24%), and 15.70% ( from 15.92%).
The analysts expect active participation in the local OTC bond markets on expected improvement in system liquidity with a resultant price appreciation (and decline in yields) this week.
Activities last week revealed that Federal Government bond prices appreciated for most maturities at the over the counter market. The 20-year, 10.00% FGN JUL 2030 bond gained N0.35 (yield declined to 14.68% from 14.75%); the 10-year, 16.39% FGN JAN 2022 paper rose by N0.30 (yield declined to 15.18% from 15.25%); the 7-year, 16.00% FGN JUN 2019 instrument appreciated by N0.35 (yield fell to 15.16% from 15.27%); while 3-year, 13.05% FGN AUG 2016 upped by N0.15 (yield lowered to 15.09% from 15.16%). However, the 5-year 15.10% FGN APR 2017 bond declined by N0.10 (yield advanced to 15.25% from 15.20%). At the international bond market, Federal Government Eurobond prices declined across all maturities amid Nigeria’s deteriorating external factors. The 6.75% FGN JAN 2021 note lost USD4.34 (yield increased to 6.93% from 6.12%), while the 5.13% FGN JUL 2018 debt decreased USD2.75 (yield increased to 5.75% from 5.02%). Similarly, the 6.38% FGN JUL 2023 bond shed USD5.60 (yield rose to 7.23% from 6.48%).