The pressured foreign exchange market ended the trading week with Nigeria’s currency gaining 0.41 percent week-on-week to close at N480 per dollar from last week’s close of N482, which was also the opening rate at the parallel market.
Naira’s appreciation was a result of improved liquidity. The Central Bank of Nigeria (CBN) sold about $100 million to over 5,000 Bureau De Change (BDC) operators within the week. The CBN sells $10,000 twice a week to the BDCs.
At the Investors and Exporters (I&E) forex window, naira weakened by 0.43 percent or N1.80k week-on-week to close at N411.00k per dollar on Friday from N409.20k on Monday. Against the previous week, it depreciated by 0.18 percent from N410.25k.
The foreign exchange daily turnover increased by 244.25 percent week-on-week to $83.93 million on Friday from $24.38 million recorded in the previous week, data compiled by BusinessDay from the FMDQ indicated.
On a day-on-day basis, the daily turnover rose to $83.93 million on Friday, which represents a 16.94 percent increase compared to $66.99 million recorded on Thursday.
Forces of demand and supply played out during the trading week as dollar shortages persisted in the market. The foreign exchange market has been under pressure since March 2020 following a sharp drop in oil prices as a result of the Covid-19 pandemic.
The Central Bank of Nigeria (CBN) had last week admitted that Naira has devalued for the third time.
“To adjust for the decrease in the supply of foreign exchange, the naira depreciated at the official window from N305/$ to N360/$ and now hovers around N410/$,” Godwin Emefiele, governor of the CBN said Friday.
However, this is yet to be reflected on the CBN’s website and the Nigerian Autonomous Foreign Exchange Fixing (NAFEX) window.
At the money market, this week, the Open Buy-Back (OBB) and Overnight (OVN) rates opened the week at 6.0% and 6.8% respectively, higher than 5.7% and 6.3% recorded in the previous week as system liquidity settled at N336.2bn, according to a report by Afrinvest Securities Limited.
On Tuesday, following inflows worth N130.5bn, system liquidity rose to N401.7bn as OBB and OVN fell to 4.3% and 4.8% respectively. On Friday, OBB and OVN rate further rose to close the week at 15.3% and 16.3% respectively despite system liquidity settling higher at N563.5bn.
On Thursday, the CBN conducted Open Market Operation (OMO) auction worth N90.0bn to mop-up excess liquidity in the system. Demand at the auction was healthy as the 90-day tenor with N10.0bn offer, N35.0 billion subscription, N10bn sale was oversubscribed by 3.5x at 7.0 percent.
Also 187-day tenor with N10.0bn offer; N57.6bn subscription; N10.0bn sales; and 362-day tenor instrument with N70.0bn offer; Subscription: N361.0bn; Sale: N70.0bn were oversubscribed by 5.8x and 5.2x with marginal rates of 8.5% and 10.1% respectively.
In the treasury bills secondary market, the performance was bullish as average yield across benchmark tenors trended lower by 5bps w/w to close at 1.7%. The medium-term instrument enjoyed the most buying interest as yields declined 15bps w/w to 1.9%. On the other hand, the short and long-term instruments closed flat for the week.
“In the coming week, we expect the CBN to sustain its OMO auction as OMO maturities worth N50.0bn would hit the system, raising system liquidity. We envisage rates will be low in the secondary T-Bills market,” analysts at Afrinvest said.
