External reserves decline by $150.81m as CBN defends naira

Nigeria’s FX reserves declined by $150.81 million week-on-week to $35.26 billion, following outflows from Central Bank’s interventions across the various the foreign exchange (FX) according to FSDH research.

The external reserves, which give the CBN the financial muscle to defend the naira, have continued to decline as result sharp drop in oil prices, and FX revenue, occasioned by Covid-19.

Naira on Monday weakened by 1.47 percent of by N7 as the dollar was sold at N482 as against N475 sold on Friday on the black market.

The local currency steadied at N480 at the Bureau De Change (BDC) segment of the foreign exchange market.

However, the BDCs funded their accounts on Monday, in anticipation for dollar disbursement on Tuesday by the Central Bank of Nigeria (CBN).

At the Investors and Exporters (I&E) forex window, Naira remained stable at N395.00 per dollar as most participants maintained bids between N384.50 and N404.91 per dollar, analysts at FSDH research said.

The Nigerian treasury bills (NT-Bills) secondary market closed on a flat note on Monday, with the average yield across the curve remaining unchanged at 0.12 percent. Average yields across short-term, medium-term, and long-term maturities closed flat at 0.06 percent, 0.09 percent, and 0.18 percent, respectively.

“We expect demand for NT-Bills to remain weak, given the low yield environment. Furthermore, investors are likely to focus on the Primary Market Auction scheduled this week, where the CBN will roll over NT-Bills maturities worth N50.93 billion,” the analysts said.

In the Open Market Operation (OMO) bills market, the average yield across the curve increased by 8 bps to close at 0.26 percent as against the last close of 0.18 percent.

Selling pressure was seen across short-term, medium-term, and long-term maturities with average yields rising by 3 bps, 24 bps, and 6 bps, respectively. Yields on 11 bills advanced with the 2-Mar-21 maturity bill registering the highest yield increase of 32 bps, while yields on 11 bills remained unchanged.

The Federal Government bonds secondary market closed on a negative note on Monday, as the average bond yield across the curve cleared higher by 11 bps to close at 1.73 percent from 1.62 percent on the previous day. Average yields across short tenor and medium tenor of the curve widened by 14 bps and 7 bps, respectively, while the average yield across long tenor of the curve remained unchanged. The 27-APR-2023 maturity bond was the best performer with a decline in yield of 3 bps, while the 23-FEB-2028 maturity bond was the worst performer with an increase in yield of 62 bps.

The FSDH report noted that the Debt Management Office (DMO) has issued a circular of FGN Savings bond for December 2020. The offer has commenced on Monday and will close on December 11. The 2-year (due on December 16, 2022) and 3-year (due on December 16, 2023) FGN Savings bonds are being offered at the coupon rates of 1.32 percent and 1.82 percent, respectively. The settlement of the bond will take place on December 16, 2020.