The Central Bank of Nigeria (CBN) has disclosed nation’s foreign exchange dropped to 435.59billion as at last Thursday.
The CBN’s foreign reserves sustained its descent as FX outflows continue to outpace inflows, thus dipping by $10.9 million in four days of last week from $35.61 billion it was on Monday.
Nevertheless, the naira was flat against the Dollar w/w to N386.00 against the Dollar at the Investors & Exporters (I&E) Foreign Exchange window but depreciated by 0.4per cent to N477.00 against the dollar at the parallel market.
In the forward market, the naira appreciated against the US dollar across the 1-month (+0.1per cent to N387.07/$), 3-month (+0.09per cent to N389.47/$), 6-month (+0.1per cent to N393.27/$) and 1-year (+0.7per cent to N406.56/$) contracts.
Analysts at Cordros capital explained that, “Despite the CBN’s stronger commitment towards exchange rate unification, we still see legroom for the currency to depreciate further, at least towards its REER derived fair value.
“Our prognosis is hinged on the widening current account (CA) position, currency mispricing, which could induce speculative attacks on the naira, and the resumption of FX sales to the BDC segment of the market which should place an additional layer of pressure on the reserves as the CBN funds the backlog of unmet FX demand.”
According to analysts at Cordros capital, “The overnight (OVN) rate ebbed down by 17.17ppts w/w to 2.6per cent as inflows from OMO maturities (N180.63 billion) and FAAC disbursements (N376.45 billion) saturated the system and eased off funding pressures from debits for FGN bond (N126.15 billion) and OMO (N72.50 billion) auctions.
“With a combined N333.31 billion expected in the system next week from OMO maturities (N283.42 billion) and FGN bond coupon payments (N49.89 billion), we expect a further contraction in the OVN.
“Trading in the Treasury bills secondary market was bullish, as liquidity posture sustained demand for instruments in the space.
“Thus, the average yield across all instruments contracted by 29bps to 3.0%. Across the market segments, average yield contracted by 42bps and 4bps to 3.6% and 1.5%, at the OMO and NTB markets. At the OMO auction, the CBN offered instruments worth NGN80.00 billion with allotments of NGN7.50 billion of the 96-day, NGN15.00 billion of the 180-day and NGN50.00 billion of the 355-day – at respective stop rates of 4.90% (previously 4.92%), 7.71% (previously 7.74%), and 8.94% (previously 8.94%).”
For this week, they expressed that, “We expect the buoyant system liquidity to sustain the demand for T-bills, as maturities are likely re-invested in the market. At the NTB segment, we expect market participants to shift their focus to next week’s PMA, where the CBN will be rolling over N197.60 billion worth of maturing bills.”
According to them, the Treasury bonds secondary market ended last week bearish, due to some profit-taking by successful participants at Wednesday’s PMA. Consequently, average yield expanded by 14bais points to eight per cent.
“At the PMA, the DMO offered instruments worth NGN150.00 billion to investors through re-openings – 12.50% JAN 2026 (Bid-to-offer: 1.3x; Stop rate: 6.7%), 12.50% MAR 2035 (Bid-to-offer: 1.2x; Stop rate: 9.35%), 9.80% JUL 2045 (Bid-to-offer: 1.0x; Stop rate: 9.75%) and 12.98% MAR 2050 (Bid-to-offer: 2.9x; Stop rate: 9.90%). Despite a total subscription of NGN242.22 billion, the DMO eventually allotted instruments worth NGN116.65 billion, resulting in a bid-cover ratio of 2.1x.
“We expect demand for bonds to pick-up in the coming week, as investors find alternative options for the liquidity coming into the system,” they explained.