Naira to stabilise on low demand for dollar in festive season

The naira is expected to stabilise against the dollar on low demand for the dollar this yuletide against improved supply from the informal sectors, analysts at Cowry Asset Management Limited have said.

Last week, the naira strengthened against the dollar on a temporal supply boost by homecoming Diaspora Nigerians for the festive season. Week-on-week, the local currency gained 3.64 percent relative to the greenback to close at N265/$ from N275/$ in the preceding week at the Bueau De Change market segment.

Similarly, the naira appreciated by 3.57 percent of its value relative to the dollar at the parallel market segment to close at N270/$ from N280/$ in the previous week.

However, the CBN clearing rate and interbank rate closed steady at N196.97/$ and N199.1/$, respectively. However, the spot rate implied slight depreciation of the naira relative to the dollar – N199.34 exchanged for $1 as against N198.56 exchanged for $1 in the previous week.

At the fixed income market, the analysts expect to see mixed performance in prices on FGN bonds at the local OTC markets, as investment activities remain low due to the Monday and Friday holidays.

Last week, Federal Government bond prices at the over-the-counter market advanced on increased bargain hunting. On a weekly basis, the 20-year, 10 percent FGN JUL 2030 bond rose by N1.06 (yield fell to 11.13%). The 10-year, 16.39 percent FGN JAN 2022 note gained N0.12 (yield decreased to 11.02%); the 7-year, 16 percent FGN JUN 2019 paper firmed by N0.94 (yield fell to 10.22%); the 5-year, 15.10 percent FGN APR 2017 debt rose by N1.73 (yield slid to 6.63%). However, the 3-year, 13.05 percent FGN AUG 2016 bond moderated by N0.67 (yield rose to 5.07%).

At the international bond market, FGN Eurobonds declined across board as investors locked in profit. The 10-year, 6.75% FGN JAN 2021 paper shed USD0.51 (yield rose to 8.29%) while the 5-year, 5.13% FGN JUL 2018 bond lost USD0.08 (yield climbed to 6.84%). Similarly, the 10-year, 6.38% FGN JUL 2023 bond fell by USD0.31 (yield rose to 8.42%).

According to a repair by Cowry Asset the Nigerian Interbank Offered Rates moved in mixed directions amid inflows from Federation Account Allocations worth N369.88 billion for the month of November. Meanwhile treasury bills worth N67.46 billion were auctioned via the primary market, viz: 91-day bills worth N28.12 billion; 182-day bills worth N39.34 billion while bills of equivalent tenors and values also mature. However, treasury bills worth N178.80 billion matured via OMO: 171-day bills worth N88.93 billion and 181-day bills worth N89.87 billion. The overnight and 1 months NIBOR fell to 1.02% (from 1.48%) and 9.09% (from 9.43%); however, the 3 months and 6 months tenors rose to 10.80% (from 12.95%) and 12.52% (from 12.27%). At the secondary market for treasury bills, the Nigerian Interbank Treasury bills True Yields also moved in mixed directions: yields on the 1 month, 6 months and 12 months yield rose, respectively, to 1.17% (from 1.02%), 5.57% (from 4.79%) and 8.65% (8.44%). However, the 3 months and fell to 3.30% (from 3.32%). This week, 153- day treasury bills worth N27.4 billion will mature via Open Market Operation.

“We expect NIBOR to move southwards as liquidity from the FAAC allocations settle into the position of the banks as well as lull in outflows due to the yuletide holidays,”  the analysts said in a report.