Naira appreciates by 0.28% to N362/Dollar at parallel market

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Following the Central Bank of Nigeria weekly intervention (CBN), Naira at the parallel market last week appreciated by 0.28 per cent to close week on week (wow) at N362 against the dollar.

Set against the foregoing economic uncertainty, the naira appreciated by 0.59 per cent to N362.79 at the Investors &Exporters (I&E) foreign exchange window with the influx of hot money into both fixed income and equities markets for much of the week.

A total foreign exchange turnover at the I&E window surged by 83.0 per cent w/w to $1.73 billion.

Furthermore, increased autonomous flows also bolstered foreign exchange reserves in the period as the CBN recorded foreign reserve accretion of $42.57 million w/w to $43.08 billion.

“With FX reserves comfortably sitting atop $43 billion, we believe CBN has more than enough firepower to leave currency stable for much of the year. However, the still elevated maturity profile, combined with some speculative tendencies will drive mild depreciation as the progresses,” analysts at Cordros capital explained.

However, the overnight lending rate moderated by 633 basis points w/w to 16.17per cent, against prior week’s close of 22.50per cent.

Rates remained elevated throughout the week, amid the CBN’s N574.59 billion Open Market Operation (OM) interventions.

However, inflows of matured OMO bills, N73.45 billion treasury bills , and N106.03 billion bond coupon payments boosted liquidity towards the end of the week, resulting in a rate decline.

“The treasury bills market last week were bullish driven by the increase in system liquidity, and increased demand from foreign investors,” analysts at  Cordros capital stated.

Consequently, yields fell 40 basis points to close the week at 14.91per cent on average.

In addition, activities in the bond market were also bullish as market players sought to re-invest coupon payments. As a result, average yield moderated by six basis point w/w to close at 15.19per cent.

“Yield moderated at the mid (-10 bps) and long (-16 bps) segment, following demand for the MAR-2027 (-34 bps) and MAR-2036 (-25 bps) bonds. On the flip side, yields widened at the short (+7 bps) end of the curve following a selloff of the FEB-2020 (+19 bps) bond.

“Demand is likely to persist over the next week as market players seek to reinvest inflows from incoming coupon payments (N67.82 billion).  However, theme for the bond market continues to favour modestly higher yields in the medium term, anchored on (1) domestic monetary policy direction, (2) sustained uptick in inflation rate, (3) capital flight amid higher yields in safe haven assets, and (4) political uncertainty stemming from the upcoming general elections,” analysts at Cordros capital added.

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