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FX turnover hits 1,132.6% high as naira weakens at I&E window

Nigeria’s foreign exchange liquidity improved on Wednesday as the daily forex turnover hit a record high of $227.29 million since almost eight weeks at the Investors and Exporters (I&E) FX window.

This represents 1,132.6 percent increase when compared with $18.44 million recorded on Tuesday, data from FMDQ show.

However, the closing rate remained scarcely changed, as FX traders remain tight-lipped on the source of the inflow.

The market closed with naira losing marginally by N0.02k as the dollar was quoted at N386.00k on Wednesday as against N385.98k that it closed on Tuesday at the I&E window.

“We expect to see some respite from pressure on the naira as the funds flow into the market,” analysts at Zedcrest Capital Limited said.

The Central Bank of Nigeria (CBN) is planning to resume FX supply to BDCs (Bureau de Change) as international flights are expected to restart from August 29. The I&E FX Window has been experiencing currency shortages as FX sales to the BDC segment remain suspended, said analysts at FSDH Research.

On the black market and retail bureau, naira was stable at N476 per dollar. It was stable at N381/$ on the official spot Nigerian Autonomous Foreign Exchange Fixing (NAFEX) window.

A report by FSDH Research stated that most participants maintained bids between N380.00 and N387.34 per dollar.

“We anticipate a surge in dollar demand, putting further pressure on the naira, which has already been adjusted twice this year,” analysts at FSDH Research said.

At the money market, the interbank system liquidity improved by about 26.24 percent to open at about N91.45Bn on Wednesday’s session as banks received some refunds from failed retail FX bids, a report by Zedcrest noted.

Consequently, the Open Buy-back (OBB) and Overnight (OVN) rates dropped again by about 240bps to close at 13.00 percent and 13.35 percent, respectively, as funding pressures gradually ease off local banks.

“We expect rates to drop even further during Thursday’s session as Open Market Operation (OMO) maturities hit the system. There remains an outside chance of an OMO auction floated by the CBN, but we don’t expect this to heavily influence rates as issued volumes remain small and targeted to foreign portfolio investors,” analysts at Zedcrest said.

Activities in the OMO bills space picked up on Wednesday as local banks resumed purchasing mid- to long-dated papers in anticipation of OMO maturities of about N181bn expected today (Thursday). The January to March bills saw the most love, trading around mid-3 percent levels all day.

“We also saw some offers at the long-end (June and August bills) but not much interest seen below 4.00 percent,” analysts at Zedcrest said.

The Nigerian treasury bills made no movements Wednesday as offers at the end of the curve (July bill) at 2.90 percent levels were still met with no demand.

“We expect market demand to persist today especially for shorter-dated bills albeit less aggressive compared to yesterday’s trading session,” the analysts said.