The demand pressure on the nation’s currency, the naira, is expected to continue this week, specifically at the parallel market, as individuals hold dollars for precautionary motive ahead of the presidential election, according to a report by Cowry Asset Management Limited.
The local currency last week weakened in most market segments despite efforts by the central bank to moderate the market. Although, the official USD/naira exchange rate held steady at N168.00/ USD, the local currency depreciated week-on-week by 2.55% (or N4.83) to N193.92/ USD at the inter-bank market – in spite of additional sales of USD50 million by SPDC to dealing lenders – and by 0.48% (or N1.00) to N208.00 against the greenback at the bureau de change.
However, the naira on Friday appreciated at the parallel market by 0.48% (or N1.00) to N209.00 after the CBN intervened in the foreign exchange market by selling additional USD30,000.00 apiece to bureau de change (BDC) operators. At its bi-weekly Retail Dutch Auction, the apex bank offered USD500 mil- lion but sold USD435.11 million, a 10.30% decrease over the USD485.08 million sold in the preceding week.
“This week we anticipate sustained pressure on the foreign exchange market amid falling foreign exchange reserves and in- creased demand in parallel market segment by individuals seeking to hold dollars for precautionary motive ahead of the presidential election”, the analysts at Cowry Asset said in the report.
On the other hand, interbank rate are expected to be sold in the course of the week) – which more than offset inflows from retired treasury bills of the same amounts and maturities – interbank lending rates increased across the tenor buckets. Overnight funds rate increased to 16.12% (from 9.25%) while NIBOR for 1 month, 3 months and 6 months tenor buckets increased to 14.78% (from 13.73%), 15.30% (from 15.09%) and 16.55% (from 16.10%), respectively.
Analysts expect further depression of bond prices at the local market amid anticipated strain in liquidity. At the primary market, government bonds worth N90 billion will be auctioned on Wednesday, February 11, 2015, viz: 5-year, FGN February 2020 bond worth N30 billion (new issue), 10- year, 14.20% FGN March 2024 bond worth N30 billion (re-opening), 20-year, 12.1493% FGN July 2030 bond worth N25 billion (re- opening).