Naira trades flat at N362/Dollar amid increase in foreign reserves

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By Kayode Tokede

The naira at the parallel market remained flat at N362 against the Dollar for the second consecutive trading weeks amid increase in nation’s foreign reserves to $43.62 billion as at March 8.

It is worth stating that the foreign reserves crossed the $43 billion-mark last week, the highest since December 2013.

Analysts at Cordros Capital said the foreign exchange market remains stable, as oil revenues – supported by stable oil prices and production – continue to shore up the foreign reserves.

The Naira against Pound Sterling and Euro also closed last week at N502 and N442 but weakened by 0.06per cent to N360.32 in the Investors &Exporter foreign exchange (I &E FX) window.

Total turnover in the I &E FX window dropped by 46.4per cent to $741.12 million from $1.38 billion in prior week’s transactions, with bulk of trades still within the N360-N369 band.  The Naira against Dollar remained unchanged at the interbank foreign exchange market at N350.8.

Meanwhile, the apex bank injected $210 million into the foreign exchange market last week, comprising $100 million, $55 million, and $55 million disbursements to the wholesale, SMEs, and invisibles windows, respectively.

Activities in the treasury bills market were mixed, albeit with a bearish tilt, as average yield rose marginally (one basis point w/w)to close the week at 15.05per cent.  Investor sentiment was negative across the short (17 basis points) and long (three per cent basis points) ends of the curve, amid selloffs of the 20D (119 basis points) and 342D (55 basis points) bills respectively.

Conversely, yields contracted at the mid (-13 basis points) segment, driven by demand for the 104D (-49 basis points) bill.

The overnight lending rate last week fell to 9.17per cent, representing an 86 basis points w/w contraction and the fourth consecutive w/w contraction since 16 February 2018.

There were inflows totaling N152.93 from matured Open Market Operation (OMO) bills and outflows totaling $210 million and N307.70 billion via foreign exchange sales and OMO auctions, respectively.

However, trading in the bond market was also bearish last week, as average yield expanded by one basis point to close at 13.66 per cent.

Investors sold off at the short (three basis points) and mid (two basis points) ends of the curve, with the JUL 2021 (19 basis points) and MAR 2024 (five basis points) bonds recording significant expansions. Yields at the long (-one basis points) end saw a marginal contraction, led by the APR-2037 (-five basis points) bond.

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