• Monday, March 04, 2024
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BusinessDay

Naira pressure to continue despite expected dollar supply from oil majors

The expected dollar sale from oil companies might not make a difference as analysts anticipate sustained pressure on the local currency this week.

However, there is no cause for alarm for foreign exchange users as the Central Bank of Nigeria (CBN) will this week intervene through forex auction at the retail Dutch Auction System (RDAS).

Last week, the naira depreciated across market segments. At the alternative market, the USD/naira exchange rate remained under pressure due to reduced dollar supplies particularly as deposit money banks came under increased monitoring by the central bank.

According to a report by Cowry Asset Management Limited, there were no reported sales by oil majors during the week, hence the local currency depreciated by 0.52% to N164.09/$1 at the interbank market segment. Also, the local currency lost value by 0.30% to N167.50/$1 at the bureau de change (BDC), while it closed at N168.50/$1 at the parallel market segment having lost 0.30% of its value.

The CBN offered USD650 million but sold a total of USD649.74 million (or N101.18 billion). This amounted to 8.30% increase on the USD599.96 million (or N93.43 billion) sold to end users at the bi-weekly Retail Dutch Auction (RDAS) in the preceding week.

Interbank rates are expected to moderate this week following liquidity boost in the financial system due to treasury bills maturities, combined with the residual funds from the N611.70 billion Federation Accounts Allocation Committee (FAAC) disbursement.

This week the CBN will auction treasury bills worth N114.40 billion via the primary market, viz: 91-day bills worth N21.54 billion; 182-day bills worth N33.78 billion; 364-day bills worth N59.08 billion.

Also, treasury bills worth N114.40 billion will mature via the primary market, viz: 91-day bills worth N21.54 billion; 182-day bills worth N33.78 billion; 364-day bills worth N59.08 billion. An additional amount of 122-day bills worth N87.49 billion will mature via Open Market Operations, bringing the total number of maturities to N201.89 billion.

In the just concluded week, Nigerian Inter-Bank Offered Rates (NIBOR) increased across most tenor buckets. This was amid the re-issuance of N100 billion worth of Federal Government bonds by the Debt Management Office (DMO) which put pressure on liquidity in the financial system. Hence, NIBOR for 1 month, 3 months and 6 months tenor buckets increased to 12.46% (from 12.01%), 13.28% (from 12.84%) and 14.20% (from 13.81%). However, overnight interest rate mellowed to 11.00% (from 11.08%).