Nigeria’s currency on Wednesday depreciated by 0.21 percent at the Investors and Exporters (I&E) forex window, in spite of increased dollar supply, which rose by 233.58 percent.
After trading on Wednesday, the naira/dollar exchange rate closed at N394.17k as against N393.35k closed on the previous day, data from FMDQ indicated. Foreign exchange market dealers maintained bid at between N390.00k and N415.76k per dollar.
The naira depreciation is attributed to strong demand for dollar by the end users to meet their obligations.
Ayodeji Ebo, senior economist/head, research & strategy, Greenwich Merchant Bank, expects the Central Bank of Nigeria (CBN) to continue to ensure that the exchange rate remains within reasonable band.
The foreign exchange turnover rose to $89.50 million on Wednesday from $26.83 million recorded on Tuesday.
At the parallel market and the Bureau De Change (BDC) segment, naira steadied at N475 per dollar on Wednesday. Doyin Salami, chairman, presidential economic advisory council, said Nigeria must adopt an FX policy that allows economy to grow.
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.
At the money marker, the Nigeria Treasury bill (NT-Bills) secondary market closed on a negative note on Wednesday with average yield across the curve increasing by 9 bps to close at 0.48 percent from 0.39 percent on the previous day.
A report by FSDH research noted that average yields across medium-term and long-term maturities widened by 1 basis point and 19 bps, respectively, while the average yield across short-term maturities declined by 1 basis point. Maximum selling pressure was seen in the NTB 13-Jan-22 (+55 bps), NTB 25-Nov-21 (+36 bps), and NTB 28-Oct-21 (+25 bps) maturity bills.
The Overnight (O/N) rate increased by 0.50 percent to close at 1.00 percent as against the last close of 0.50 percent, and the Open Buy Back (OBB) rate also increased by 0.13 percent to close at 0.50 percent from 0.37 percent on the previous day.
“We expect money market rates to remain at subdued levels with no significant funding pressure by market participants,” analysts at FSDH said.
In the Open Market Operation (OMO) bills market, the average yield across the curve remained unchanged at 0.75 percent. Average yields across short-term, medium-term and long-term maturities closed flat at 0.24 percent, 0.33 percent, and 1.19 percent, respectively.
FGN bonds secondary market closed on a negative note on Wednesday, as the average bond yield across the curve cleared higher by 8 bps to close at 3.34 percent from 3.26 percent on the previous day. Average yields across short tenor and long tenor of the curve advanced by 11 bps and 14 bps respectively, while the average yield across medium tenor of the curve compressed by 12 bps. The 22-JAN-2026 maturity bond was the best performer with a decrease in the yield of 52 bps, while the 27-MAR-2035 maturity bond was the worst performer with an increase in yield of 60 bps.
The Debt Management Office (DMO) conducted its scheduled FGN bond auction to reopen the 10-year, 15-year, and 25-year instrument. A total of N150 billion was offered across 10-year (N50 billion), 15-year (N50 billion), and 25-year (N50 billion) tenors. The bond settlement will take place on January 22, 2021.
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