Nigeria’s currency on Thursday closed stable at various segments of the foreign exchange as liquidity increased significantly at the Investors and Exporters (I&E) forex window.
The foreign exchange daily turnover rose by 429.92 percent to $116.16 million on Thursday from $21.92 million recorded on Wednesday.
Consequently, after trading on Thursday naira steadied at N410.50k per dollar at the I&E window, the same rate closed on Wednesday, data from the FMDQ indicated.
Currency traders who participated in the trading on Thursday maintained bids at between N392.00k and N437.62k/$, according to the data.
Exchange rate remained flat at N482 at the Bureau De Change (BDC) segment of the foreign exchange market and at the parallel market.
Over the past four years, the CBN’s FX reforms have assisted with improved liquidity, according to analysts at FBNQuest.
However, in light of the COVID-19 outbreak, there has been additional vulnerability to swings in oil prices as well as increased exit of foreign portfolio investors (FPIs) which have adversely affected exchange rate stability.
Demand for FX remains high and the supply is inadequate for regular uses. The CBN’s Investors and Exporters (I&E) window rate is currently N409/USD. This compares with N482/USD at the parallel market.
Oil receipts (including oil-related taxes) contribute to external reserves. Oil prices have continued to firm over the last few months, averaging USD61/b in the first quarter of (Q1) 2021. This compares with USD45/b recorded in the fourth (Q4) 2020.
The recovery can be attributed to production cuts by OPEC+ and ongoing mass vaccination across the globe which has fuelled optimism on a global economic recovery.
Despite the welcome recovery in oil prices, Nigeria’s FX market is still faced with uncertainty.
The gross official reserves declined modestly in March by USD279m (subject to a caveat that the figure should be adjusted downwards to allow for the pipeline of delayed external payments, which the International Monetary Fund (IMF) estimated late last year at up to USD3bn).
The modest decline is perhaps due to the CBN’s “Dollar for Naira” initiative, its latest move to boost the flow of diaspora remittances into the country and thus boost FX supply, the analysts said.
At the money market, the Nigerian Treasury Bills secondary market closed on a positive note on Thursday with average yield across the curve decreasing by 7 bps to close at 4.37 percent from 4.44 percent on the previous day, a report by FSDH Research stated.
The average yields across medium-term and long-term maturities declined by 3 bps and 13 bps, respectively. However, the average yield across short-term maturities closed flat at 2.41 percent. Moreover, the CBN held its scheduled Primary Market Auction on April 14, selling NT-Bills worth N232.57 billion across the 91-day (N12.46 billion), 182-day (N87.99 billion), and 364-day (N132.12 billion) tenors.
The stop rates for the 91-day and 182-day remained unchanged at 2.00 percent and 3.50 percent, respectively. However, the stop rate for 364-day tenor cleared higher at 9.00 percent (+100 bps). The auction was undersubscribed by 55 percent, with bid-to-cover ratios settling at 1.00x (91-day), 0.31x (182-day), and 0.44x (364-day).
