Naira closes week with marginal gain

The foreign exchange market ended the trading week with Nigeria’s currency appreciating marginally at the Investors and Exporters (I&E) forex window amid improved liquidity.

Naira gained 0.03 percent Week-on-Week to N410.00k on Friday as against the opening rate of N410.13k on Monday at the I&E window.

The foreign exchange market turnover increased by 179.86 percent Week-on-Week to $72.43 million at the end of trading session on Friday from $25.88 million recorded at the opening trading day on Monday, data compiled from the FMDQ indicated.

Aminu Gwadabe, president, Association of Bureau De Change Operators of Nigeria (ABCON), however, questioned the improvement in liquidity.

“The liquidity improvement in I&E window (which you are referencing) is for bonds investment and hot and volatile money,” Gwadabe said.

“We can only see improvement on liquidity when we deepen remittances with home-grown innovations that the BDCs are prepared for,” he said.

Exchange rate remained flat at N485 at the Bureau De Change (BDC) segment of the foreign exchange market.

The local currency strengthened by 0.20 percent to N485 per dollar at the end of the week from opening rate of N486/$ on Monday at the black market.

“We want to replace Aboki fx.com with a more market rate reality and both transactionary and informative. We are building the API and will update media and the public soonest,” Gwadabe told BusinessDay.

Oil market featured increased volatility this week following slow vaccinations and brewing concerns about a third wave of COVID-19 lockdown. However, the Suez Canal blockage backed up an increase in price. Consequently, Brent price rose marginally by 0.1% to $64.6/bbl this week.

Locally, external reserves rose 0.5% w/w to $34.6bn ( 3/24/2021), according to a report by Afrinvest Securities Limited.

At the FMDQ Securities Exchange (SE) FX Futures Contract Market, the total value of open contracts rose 1.7% ($106.9m) to $6.5bn. The MAR 2022 instrument (contract price: N437.88) sustained its strong demand with an additional subscription of $5.0m, which took total value to $10.5m. Also, the JAN and FEB 2022 instruments (contract prices: N434.08 and N435.08) saw significant buying interest, as total value increased $48.0m and $38.4m respectively to $233.3m and $413.4m.

“In the coming week, we expect rates to remain in the same band across various segments of the market,” analysts at Afrinvest said.

During the week, the Open Market Operation (OMO) maturities worth N50.0bn hit the system. However, system liquidity closed lower at N54.8bn compared to N120.1bn at the beginning of the week following CBN’s OMO auction worth N40.0bn.

The OMO sale was oversubscribed at a bid-to-cover ratio of 6.7x, with the 355-day instrument enjoying the most demand. Marginal rates remained the same as in the previous auction at 7.0%, 8.5% and 10.1% for the 89, 173 and 355-day instruments respectively.

“With considerations of high liquidity and sustained attractive rates, we expect the strong demand to be maintained in succeeding auctions,” the analysts said.