Nigeria’s foreign exchange market closed the week with 0.3 percent loss in the value of the naira against the dollar, weaker than 0.36 percent it closed the previous week at the Investors and Exporters (I&E) forex window.
The loss in the naira value was due to strong demand for dollars by end users to meet their various imports obligations.
Week-on-week naira/dollar exchange rate closed at N411.00k on Friday as against the opening rate of N409.75k on Monday at the I&E window.
On Monday, the naira depreciated by 0.18 percent to N409.75k compared to N409.00k on Friday.
On Tuesday, it weakened against the dollar by 0.31 percent in spite of improved liquidity at the I&E forex window.
Nigeria’s currency on Wednesday strengthened against the dollar by 0.12 percent, amid low liquidity at the I&E.
On Thursday, the naira closed stable at various segments of the foreign exchange market as liquidity increased significantly at the I&E forex window.
It depreciated by 0.12 percent as the dollar was quoted at N411.00 as against the last close of N410.50.
Foreign exchange market turnover increased by 35.65 percent Week-on-Week to $61.52 million on Friday from $45.35 million recorded at the opening of the trading week on Monday.
The local currency closed flat at N482 on the black market and at the Bureau De Change (BDC) segment of the foreign exchange market.
Within the week, supply curbs by the OPEC+ and decline in US shale oil inventory buoyed the oil market, according to a report by Afrinvest Securities Limited. Consequently, oil prices increased 6.0% w/w to close at $66.77/bbl. On the domestic front, external reserves inched higher by 0.6% w/w to $35.0bn as at April 14, 2021.
At the FMDQ Securities Exchange (SE) FX Futures Contract Market, the total value of open contracts increased by 1.6% ($82.8m) to $5.3bn. The APR 2022 instrument (Contract price: N437.88) saw a significant gain as there was an increase of 281.0% to $85.7m in the total value. The JUN 2021 instrument (Contract price: N422.08) recorded the least buying interest as total value rose 1.4% to $283.6m. In the coming week, we anticipate rates to remain in the same band across the segments of the FX market.
Liquidity level rose at the start of week compared to the prior week’s close and ended the week higher at N599.3bn, despite Open Market Operation (OMO) and T-bills auctions. At the T-bills auction on Wednesday, the CBN sold instruments worth N153.4bn, N83.8bn higher than the amount on offer. Stop rate for the 364-day instrument inched higher by 100bps to 9.0% while the 91 and 182-day instruments remained at 2.0% and 3.5% respectively. Strong demand was sustained across board at a bid-to-cover ratio of 1.0x, 3.1x and 4.4x for the 91, 182 and 364-day instruments respectively.
On Thursday, the CBN mopped up N100.0bn via OMO auction, higher than the week’s maturities of N20.0bn.
From the result, demand levels were high with subscription at N92.2bn compared to N20.0bn offered.
This implies an oversubscription of 4.6x with the 362-day instrument enjoying the most demand. Rates stayed untouched at 7.0%, 8.5% and 10.1% for the 89, 187 and 362-day instruments, respectively.
Accordingly, Open Buy-back (OBB) and Overnight (OVN) rates moved in line with system liquidity dynamics, opening the week lower at 12.0% and 12.3% respectively. Nevertheless, OBB and OVN rates closed the week high at 25.0 percent and 28.3% respectively despite robust liquidity level. Similarly, average T-bills yield in the secondary market closed the week at 4.8 percent, up 4bps w/w. The 91 and 364-day instruments saw sell-offs as yield rose 8bps and 10bps w/w respectively while yield on the 182-day instrument fell 5bps.
In the week ahead, we expect rates to remain flat despite a N20.0bn OMO inflow and a possible CBN mop-up.
