Naira weakens by 0.31% despite improved liquidity

Nigeria’s currency on Tuesday weakened against the dollar by 0.31 percent in spite of improved liquidity at the Investors and Exporters (I&E) forex window.

The foreign exchange daily market turnover increased by 18.03 percent to $53.53 million on Tuesday from $45.35 million recorded on the previous day.

Consequently, after trading on Tuesday, naira/dollar exchange rate closed at N411.00k/$ compared to N409.75k/$ quoted on Monday at the I&E window, data from the FMDQ indicated.

Currency traders who participated in the trading on Tuesday maintained bids at between N400.00k and N436.81k/$, according to data from the FMDQ.

Exchange rate remained flat at N482 at the Bureau De Change (BDC) segment of the foreign exchange market and at the parallel market.

At the money market, the Central Bank of Nigeria (CBN) will on Wednesday conduct a Primary Market Auction to roll over NT-bills maturities worth N69.56 billion across 91-day (N15.92 billion), 182-day (N4.50 billion), and 364-day (N49.14 billion) tenors.

The Nigerian Treasury Bills secondary market closed on a negative note on Tuesday with average yield across the curve increasing by 7 bps to close at 4.46 percent from 4.39 percent on the previous day, a report by FSDH Research noted.

The average yield across long-term maturities widened by 12 bps on Tuesday. However, the average yields across short-term and medium-term maturities closed flat at 2.41 percent and 3.25 percent, respectively. The yield on the 31-Mar-22 maturity bill advanced by 128 bps, while yields on 20 bills remained unchanged.

The Overnight (O/N) rate increased by 0.50 percent to close at 12.75 percent on Tuesday as against the last close of 12.25 percent on Monday, and the Open Buy Back (OBB) rate increased by 0.25 percent to close at 12.25 percent from 12.00 percent on the previous day.

In the Open Market Operation (OMO) bills market, the average yield across the curve remained unchanged at 6.79 percent. Average yields across short-term, medium-term, and long-term maturities closed at 3.77 percent, 6.22 percent, and 7.79 percent, respectively.

The Federal Government of Nigeria (FGN) bonds secondary market closed on a negative note on Tuesday, as the average bond yield across the curve cleared higher by 112 bps to close at 8.21 percent from 7.09 percent on the previous day.

Average yields across short tenor and long tenor of the curve widened by 143 bps and 22 bps, respectively. However, the average yield across the medium tenor of the curve remained unchanged.

The 24-JUL-2045 maturity bond was the best performer with a decline in yield of 8 bps, while the 27-APR-2023 maturity bond was the worst performer with an increase in yield of 336 bps. We expect the secondary bond market to remain subdued as investors await the upcoming FGN Bond auction at the primary market.