Naira stable as investors clear CBN’s N70bn OMO offer

Nigeria’s currency at the weekend maintained stability as the dollar was traded at N466 and N465 on the black market and Bureau De Change (BDC) segment of the foreign exchange market.

The foreign exchange market has witnessed dollar shortages since early this year as a result of sharp drop in prices of oil, which accounts for about 90 percent of the country’s foreign exchange earnings and low inflows from remittances due to the Covid-19 pandemic.

The daily foreign exchange turnover declined by 13.44 percent to $85.43 million on Friday from $98.69 million recorded on Thursday at the Investors and Exporters (I&E) forex window.

At the I&E window, naira remained stable at N386.00 per dollar for the second consecutive day. Analysts at FSDH Research said most participants maintained bids between N383.00 and N390.34 per dollar.

The Central Bank of Nigeria (CBN) on Thursday conducted an Open Market Operation (OMO) selling bills worth N70.00 billion across the 75-day (N10.00 billion), 180-day (N10.00 billion), and 355-day (N50.00 billion) tenors.

The auction, according to FSDH Research, was significantly oversubscribed, indicating a subscription level of 352 percent (N246.72 billion). Demand was skewed towards short tenor bills with bid-to-cover ratios settling at 5.80x (75-day), 3.81x (180-day) and 3.01x (355-day).

The stop rates for 75-day, 180-day, and 355-day tenors cleared lower at 4.77 percent (-9 bps), 7.60 percent (-8 bps), and 8.70 percent (-20 bps), respectively.

“We expect a more active market to close out the week, as the CBN is expected to drain system liquidity via various debits while supply from the auction flows to the secondary markets,” analysts at Zedcrest Capital Limited said.

A report by FSDH Research showed that In the OMO bills market, the average yield across the curve increased by 10 bps to close at 1.87 percent against the last close of 1.77 percent.

Selling pressure was seen across medium-term and long-term maturities with average yields rising by 24 bps and 5 bps, respectively. However, the average yield across short-term maturities remained unchanged at 1.59 percent. Yields on 6 bills advanced with the 2-Mar-21 maturity bill registering the highest yield increase of 159 bps, while yields on 24 bills remained unchanged.

The Nigerian treasury bills (NT-Bills) market closed on a flat note with average yield across the curve remaining unchanged at 1.65 percent.