Naira weakens further as FX turnover declines by 70.95%

Nigeria’s currency on Wednesday weakened further by 0.12 percent following strong demand for and shortage of dollars at the Investors and Exporters (I&E) forex window.

The foreign exchange daily turnover declined significantly by 70.96 percent to $11.85 million on Wednesday compared with $40.80 million recorded on Tuesday.

Consequently, after trading on Wednesday naira/dollar exchange rate closed at N411.00k as against N410.50k quoted on the previous day at the I&E window, data from the FMDQ showed.

Currency traders who participated in the trading on Wednesday maintained bids at between N405.00k and N438.00k/$.

Exchange rate remained flat at N485 at the Bureau De Change (BDC) segment of the foreign exchange market and the parallel market.

Read Also: Improved forex inflow strengthens naira

At the money market, the Nigeria treasury bills secondary market closed on a flat note on Wednesday, with the average yield across the curve remaining unchanged at 3.97 percent, according to a report by FSDH research. Average yields across short-term, medium-term, and long-term maturities closed at 2.40 percent, 3.30 percent, and 5.46 percent, respectively.

The Overnight (O/N) rate decreased by 0.25 percent to close at 13.50 percent on Wednesday as against the last close of 13.75 percent on Tuesday, and the Open Buy Back (OBB) rate decreased by 0.83 percent to close at 12.67 percent from 13.50 percent on the previous day.

“We expect money market rates to remain at elevated levels due to a possible OMO auction by the CBN,” analysts at FSDH said.

In the Open Market Operation (OMO) bills market, the average yield across the curve increased by 13 bps to close at 6.46 percent on Wednesday as against the last close of 6.33 percent the previous day.

Selling pressure was seen across medium-term and long-term maturities with average yields rising by 22 bps and 13 bps, respectively. However, the average yield across short-term maturities closed flat at 4.20 percent.

Yields on 15 bills advanced with the 28-Sep-21 maturity bill registering the highest yield increase of 62 bps, while yields on 11 bills remained unchanged.

The Debt Management Office (DMO) has released its FGN Bonds Issuance Calendar for the second quarter of 2021, indicating plans to raise funds in the range of N450 billion-N540 billion to finance the budget deficit over the next three months.

Furthermore, the DMO is expected to offer bonds during the quarter through re-opening of 10-year (N150 billion – N180 billion), 15-year (N150 billion – N180 billion), 25-year (N100 billion – N120 billion), and 30-year (N50 billion – N60 billion) tenors.

FGN bonds secondary market closed on a mildly negative note on Wednesday as the average bond yield across the curve cleared higher by 3 bps to close at 6.80 percent from 6.77 percent on the previous day.

Average yields across medium tenor and long tenor of the curve widened by 1 basis point and 32 bps, respectively. However, the average yield across short tenor remained unchanged. The 24-JUL-2045 maturity bond was the worst performer, with an increase in yield of 34 bps.