Naira firms against dollar across FX markets

Nigeria’s currency on Wednesday strengthened against the dollar across foreign exchange market segment, driven by forces of demand and supply.

The local currency gained 0.21 percent as the dollar closed at N474 on Wednesday as against N475 on Tuesday at the parallel market.

Naira remained stable at the Bureau De Change (BDC) segment of the foreign exchange market where the dollar was sold at N470 since the beginning of the year.

At the Investors and Exporters (I&E) forex window, naira strengthened by 0.17 percent as the dollar was quoted at N393.33k on Wednesday compared to N394.00k quoted on the previous day.

Data from the FMDQ show that foreign exchange market dealers maintained bid at between N390.00k and N414.90k to the dollar. The Central Bank of Nigeria (CBN)’s official remained at N379 to the dollar.

The foreign exchange market has been under pressure since March 2020 following a sharp drop in oil prices as a result of Covid-19 pandemic.

Muda Yusuf, director general, Lagos Chamber of Commerce and Industry, was concerned about the excessive focus on the demand management side of the foreign exchange market. “There is no clear strategy on how to encourage more supply to come into the system”, he said.

Read also: Naira weakens across FX markets as dollar scarcity persists

BDCs on Monday advocated for unification of exchange rates saying it is necessary to maximise the economic benefits of increased remittances inflow into the economy.

At the money market, the Nigeria treasury bills (NT-Bills) secondary market closed on a negative note on Wednesday with average yield across the curve increasing by 3 bps to close at 0.51 percent from 0.48 percent on the previous day, according to a report by FSDH research.

Average yields across short-term and medium-term maturities widened by 11 bps and 1 basis point, respectively, while the average yield across long-term maturities remained unchanged at 0.73 percent. Maximum selling pressure was seen in NTB 11-Feb-21 (+17 bps), NTB 25-Feb-21 (+14 bps), and NTB 11-Mar-21 (+12 bps) maturity bills. At the Primary Market Auction held on Wednesday, the CBN offered NT-Bills worth N232.36 billion across 91-day (N12.76 billion), 182-day (N26.60 billion), and 364-day (N193.00 billion) tenors.

The Overnight (O/N) rate declined by 1.50 percent to close at 2.00 percent as against the last close of 3.50 percent, and the Open Buy Back (OBB) rate also declined by 1.50 percent to close at 1.50 percent from 3.00 percent on the previous day.

“The system liquidity is expected to remain elevated as inflows from maturing OMO bills worth N211.30 billion and NT-Bills maturities worth N232.36 billion are expected to hit the system tomorrow (Thursday), analysts at FSDH said.