The pressure on naira may continue this week following dollar supply shortage as foreign exchange markets close for the two days holiday to mark the Muslim festival.
However, the Central Bank of Nigeria (CBN) may sustain the $500 million which is the amount of dollar offered at the Retail Dutch Auction System (RDAS) to cushion the effect of the demand pressure on foreign exchange.
“We anticipate the pressure on the local unit will continue to build into next week as the bank holidays limit the number of days available for the auction. The CBN is also likely to sustain the amount offered (US$500.0 million) at the RDAS market this week to cushion this demand, analysts at Afrinvest have said.
Analysts at Cowry Asset Management Limited also said “we expect USD/naira exchange rate to increase amid sustained short term decline in crude oil prices and dollar supply shortage due to the public holidays on Monday and Tuesday for the Eid-el-Kabir celebrations”.
On Monday, the CBN increased the daily amount offered at the RDAS market from US$300.0 million to US$500.0 million. The increase in the amount offered was provided to cover-up for Wednesday’s bank holiday and the upcoming increase in demand during the Eid-el-Kabir. The CBN sold $500.0 million to 20 banks at the primary market RDAS auction at the marginal rate of N155.75/US$1.00.
The naira commenced the week lower, trading as high as N164.15/US$1.00 by mid-day trades prior to the CBN’s intervention. The intervention spurred gains in the naira to close at N163.80/$1.00, a 15 kobo gain relative to Friday close. The naira equally strengthened 50 kobo at the BDC segment to close N168.50/US$1.00. On Tuesday, dollar sales by oil companies and sustained ad-hoc intervention by the CBN aided the naira to close flat despite recording mid-day volatility. Pent-up demand due to the Independence Day public holiday on Wednesday led to a wide demand-supply mismatch on Thursday, forcing the naira to close at a 6 months low of N164.10/US$1.00 at the interbank. Week-on-week the naira shed 35 kobo at the inter-bank market, according to a report by Afrinvest.
Inter-bank rates are expected to rise this week in the absence of major inflows, even as analysts anticipate a net deficit in financial system liquidity. A report by Cowry Asset revealed that the apex bank will auction treasury bills worth N131.83 billion, viz: 91-day bill worth N20.16 billion; 182-day bills worth N43.49 billion; and 364-day bills worth N68.18 billion.
Last week, the CBN auctioned treasury bills worth N170 billion via Open Market Operations, viz: 73-day bills worth N50 billion; 161-day bills worth N50 billion; 164-day bills worth N40 billion; and 177-day bills worth N30 billion. However, treasury bills worth N282 billion matured via open market operations, viz: 105-day bills worth N161.99 billion; 121-day bills worth N35.43 billion; and 122-day bills worth N84.59 billion.
