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Naira weakens against dollar across four segments

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Last month, naira weakened against the US dollar across the four segments, Financial Market Dealers Association (FMDA) report for the month of April has shown.

Financial dealers said the naira depreciated by 1kobo at Central Bank of Nigeria (CBN) Wholesale Dutch Auction System (WDAS) window, 15kkobo at interbank and 100kobo at BDC and parallel market relative to the average rates in the previous month.

The US dollar traded in the ranges of N155.74/$ –N155.75/$ at WDAS, N157.35/$ – N158.98/$ at Interbank, N159.50/$ – N160.50/$ at BDC and N160.00/$ – N161.00/$ at parallel market.

According to the report, “Further analysis on month-on-month (MoM) revealed an opening figure of $1/ N155.74 for selling rate at the first working day at the WDAS, and closed the month of April at $1/ N155.75 against the closing rate of $1/ N155.74 in the previous month. At the Interbank market, Naira-Dollar relationship opened at $1/ N158.60 for Offer rate and closed at $1/ N158.00 in April against the closing rate of $1/ N158.65 in the previous month. The BDC and parallel markets closed the month at $1/ N160.50 and $1/ N161.00 respectively.

“The naira depreciated in the interbank market as a result of demand surge from importers to cover import bills albeit short US dollar supply, low foreign capital inflows and unstable crude oil prices,” FMDA.

The premium between CBN and Parallel market as at end-April rose to 4.75 percent from 3.04 percent recorded at the end of the previous month. The premium reflects a margin of 0.25 percent below the international benchmark of 5percent , a clear signal of the current pressure on the local currency in the face of the apex bank’s foreign exchange management efforts at nipping volatility in the bud. Despite the demand pressure, the NGN is expected to stabilize between $1/N155.00+3 percent band in the coming months if the CBN’s intervention, anticipated dollar flows from oil companies and increased inflows from foreign investors persist.

Actively traded rates in the interbank Naira market experienced mixed reaction responding to the ongoing aggressive liquidity management efforts of the monetary authority.

Interbank lending rates trended south in the first week due to inflows via N252.84billion repayment in matured Treasury bills and March-end postings despite withdrawals from Open Market Operation (OMO) sales worth N100.80billion, special OMO 12.75 fixed rate mop-up of N419.02bn and WDAS debits of N36.93billion leading call, 7 days and 30 days money to close at 10.29percent, 10.62 percent and 11.04 percent respectively.

NIBOR experienced a mixed reaction as net cash balances resulted in a negative figure of (N16.10billion) and hence closed higher for the second week above the MPR at 12.41percent, 12.75 percent and 13.00 percent for call, 7days and 30 days respectively on the back of system Withdrawals of N183.65billion via PMA and N152.05billion in OMO auction and WDAS debit of N93.45billion despite repayment of matured T-bills of N304.92billion.

“The upward movement in rates persisted in the third week as rates spiked 140-150bps to close at 13.87percent, 14.12 percent and 11.41 percent for call, 7days and 30days money buoyed by outflows of N458.23billion in OMO sales, bond settlement of N104.80billion, NNPC cash withdrawals of N127billion and WDAS Naira Debits of N77.66billion as inflows via statutory allocation of N250.98billion, and N217.94billion in net maturing bills proved insufficient to douse withdrawals,” said FMDA.

They noted however that interbank lending rates fell 330-350basis points in the fourth week to close at (10.41percent, 10.79percent, and 11.04percent) for Call, 7 days and 30 days respectively on the back of streams of system injection via FAAC augmentation, SURE-P and overhead cost of N93.50billion and Tbills repayment of N325.09billion despite OMO bills withdrawals of N227.21billion and N80.79billion worth of WDAS Debit.

“Month-on-month, average NIBOR-call rose 0.09 percent from 10.39 percent in March to 11.39 percent in April, 7days rose by 0.09 percent from 10.70 percent to 11.70 percent and 30days money rose by 0.08percent, from 11.08 percent to 11.97 percent respectively below the benchmark interest rate reflecting a comparative reduction in Relative Liquidity Status (RLS) in the month of April,” the financial dealers said. 

IHEANYI NWACHUKWU