Naira stability expected as Emefiele takes office

Analysts and foreign exchange dealers expect sustained stability of the naira at the official market this week as the new central bank
governor, Godwin Emefiele, assumes office.

Meanwhile, in the absence of autonomous dollar sales, particularly from oil majors, analysts at Cowry Asset Management Limited
anticipate pressure on the USD/Naira exchange rate at the alternative market segments.

Last week, the official USD/Naira exchange rate steadied at N155.73 after the central bank sold a total of USD609.5 million worth of foreign exchange at the Monday and Wednesday’s Retail Dutch Auction (RDAS). The local currency also held steady at the bureau de change and the parallel market at N166.50/$1 and N167.50/$1, respectively.

However, at the inter-bank market, the naira weakened slightly against the greenback, the exchange rate rose by 0.33% (or N0.53)
to N162.58/$1, despite sales of over USD43 million by local units of Chevron and Royal Dutch Shell to dealing lenders.

At the money market this week, inter-bank rates are expected to rise following banks’ participation in the bi-weekly CBN Retail
Dutch Auction (RDAS) and treasury bills auction worth N128.65 billion via Open Market Operation (OMO).

The treasury bills will consist of 91-day bills worth N22.97billion; 182-day bills worth N30 billion; and 364- day bills worth N75.68 billion.

However, treasury bills worth N128.65 billion will mature, viz 91-day bills worth N22.97 billion; 182- day bills worth N30 billion;
and 364-day bills worth N75.68 billion.

Last week, Nigerian Inter-Bank Offered Rates (NIBOR) increased weekon-week for all placement tenors amid strained financial system liquidity.

The overnight rate rose to 10.95% (from 10.77%) while the 1 month rate increased to 12.44% (from 12.35%).

Similarly, the 3-month and 6-month rates rose to 13.52% (from 13.20%) and 14.43% (from 14.28%), respectively.

Also this week at bond market, analysts expect to see sustained bearish activity amid squeeze in financial system liquidity, resulting to price declines (and increase in yields) for tracked maturities.

In line with analysts expectations, bond prices last week fell and yields rose in all OTC-traded Federal Government long-term debt
instruments save the 20-year, 10.00% FGN July 2030 bond which closed steady as investors sold off their positions in order to take profit. The 10-year, 16.39% FGN January 2022 paper depreciated week-on-week by N1.95 (yield increased to 12.79% from 12.44%); the 7-year, 16.00% FGN June 2019 instrument moderated by N2.40 (yield advanced to 12.66% from 12.07%); the
5-year, 15.10% FGN April 2017 debt declined by N1.85 (yield rose to 12.59% from 11.86%); while the 3-year, 13.05% FGN August 2016 note lost N1.15 (yield rose to12.39% from 11.80%).