The value of the naira against the US dollar depreciated across the four market segments last month, latest monthly financial and economic report of Financial Markets Dealers Association (FMDA) has shown.
On the average, the naira fell by 1 kobo at the CBN’s window, 105 kobo at inter-bank, and 100 kobo each at the bureau de change (BDC) and parallel market segments when compared with February’s average rate. The dollar traded between N155.75/$ and N155.76/$ at Wholesale Dutch Auction System, N157.39/$ and N159.48/$ at inter-bank, N158.50/$ and N160.00/$ at bureau de change (BDC) and N159.00/$ and N160.50/$ at parallel market. The range widened more for the inter-bank and parallel markets in the month under review.
FMDA noted that “the naira succumbed to intense demand pressure and raced close to N160 per dollar (/$) at the inter-bank market for the first time in the last five months before the apex bank’s intervention through direct sales to inter-bank and increased supply at Wholesale Dutch Auction System (WDAS) window. This follows robust naira liquidity which influenced increased demand for settlement of import bills amidst unanticipated but mild capital flight from the debt market on sell-off by offshore investors earlier in the month under review.”
“Further analysis on month-on-month revealed same opening and closing figure of $1/N155.7500 for selling rate at the WDAS, same as the closing rate of $1/N155.7500 of the previous month. At the inter-bank market, naira-dollar relationship opened at $1/N158.2200 for offer rate and closed at $1/N158.4000 against the closing rate of $1/N158.5800 in February 2013. The BDC and parallel markets closed the month at $1/N160.0000 and $1/ N160.5000, respectively,” FMDA noted.
It further added: “The premium between CBN and parallel market as at end-March extended to 3.04 percent from 1.47 percent recorded at the end of February 2013. Nevertheless, the premium reflects a margin of 196 basis points (bps) below the international benchmark of 5 percent which further underscored the CBN’s resolute commitment toward sustaining the relatively stable exchange rate regime even in the face of demand pressure, based on its key role in maintaining macroeconomic stability”.
At the WDAS, the wholesale market for foreign exchange experienced increased market demand compared to the previous month. The apex bank offered $1.940 billion and sold $1.902 billion in relation to $1.160 billion offered and $1.153 billion sold in February 2013, reflecting an increase of 67.24 percent and 64.96 percent, respectively.
The northward trend in market demand from WDAS window was influenced by strong demand for capital goods by importers on release of first quarter statutory allocation for capital projects and sell-offs by offshore investors, that exited the bonds market early in the month amidst slowdown in complementary inflows from energy companies estimated at $630 million and foreign portfolio investment in the debt market.
This trend, according to FMDA, is likely to reverse in the near term “as demand at the WDAS eases on improved dollar inflows from complementary autonomous sources while increasing confidence in the ability of CBN to meet demand as a result of increasing reserves and its firm pursuit of FX stability wade-off speculative posture. The WDAS forwards market was further dormant in the month under review, reflecting nine consecutive months of inactivity in this segment of the foreign exchange market basically due to the stability in the FX spot market.”