Story by Kayode Tokede
Naira trading at the Investors & Exporters Foreign Exchange (I&E FX) gained 0.04 per cent to close last week at N360.88 against the dollar in the absence of the Central Bank of Nigeria’s (CBN) interventions,
At the parallel market, it remained flat at N360 against the dollar following low trade.
Halting the depletion from last week, the CBN recorded foreign reserves accretion of $40 million week-on-week (w/w) to $44.84 billion.
Meanwhile, total turnover in the I&E FX decreased by 20.0 per cent to $971.07 million.
Furthermore, trades in foreign exchange forwards market showed that the Naira/Dollar depreciated across the 1- month (-0.06per cent to N363.64), 3-month (-0.27per cent to N369.86), 6-month (-0.11per cent to N381.51), and 1-year (-0.04per cent to N404.26) contracts.
“Looking ahead, we expect the naira to remain resilient in the short to medium term, as the still elevated crude price continues to underpin higher oil receipts, thereby supporting the CBN’s continued intervention. In addition, the sustained deluge of portfolio inflows further supports our view of currency stability,” analysts at Cordros capital said.
According to analysts at Cordros capital, “Proceedings were also bullish in the bond market, following the decline in short term rates, and as market players reacted positively to the news of the re-appointment of the CBN governor for another five-year term.
“As a result, average yield compressed 20 basis points, w/w, to close at 14.04per cent. Buy sentiment was spread across the short (-13 basis points), mid (-22 basis points) and long (-27 basis points) segments, with yields on the JUL-2021 (-40 basis points), FEB-2028 (-31 basis points) and APR-2037 (-31 basis points) bonds recording significant declines.”
The company in its weekly report said “Activities in the treasury bills market were bullish, driven by. One, relatively buoyant liquidity at midweek, and further moderation in OMO rates.
“Consequently, yields declined by 21 basis points on average, w/w, to close to close at 12.19per cent. Yields contracted across the mid (-33 basis points) and long (- 29 basis points) segments, driven by demand for the 111DTM (-120 basis points) and 195DTM (-57 basis points) bills, respectively. Conversely, a selloff of the 27DTM (+175 basis points) bill led to yield expansion at the short (+26 basis points) end of the curve.”
“In line with our outlook, the overnight lending rate expanded by 407 basis points to close at 10.00per cent as outflows for the CBN’s OMO (N613.25 billion) and foreign exchange (undisclosed) auctions outweighed inflows from matured OMO bills (N196.41 billion) and FAAC disbursements (N348.59 billion).
“In the week ahead, inflows from maturing OMO bills (N272.16 billion) will bolster system liquidity. Barring aggressive liquidity mop-ups by the CBN, a contraction in the overnight lending rate is likely,” the Lagos base company explained.