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%).
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