Foreign reserves gain $1.13bn in 13 days — CBN
By Kayode Tokede
The Central Bank of Nigeria (CBN) has disclosed that the foreign reserves gained $1.13 billion in 13 days.
Our correspondent gathered that the foreign exchange buffer between December 31,2020 to January 21, 2021 moved from $35.37billion to $36.51billion as at January 21, 2021.
Also, the foreign exchange reserves in 2021 sustained its ascent increase, reaching its highest level since June 10, 2020.
Across the foreign exchange market, the naira appreciated against the dollar by 0.1per cent week-on -week (w/w), to N394.17 against the dollar at the Investors & Exporters Foreign Exchange (I&E FX) window, and depreciated by 0.4 per cent to N477.00 against the dollar in the parallel market.
At the I&E window, total turnover decreased by 29.3 Week-Till-Date (WtD) to $262.37 million, with trades consummated within the N388.00 – 415.76 against the dollar band.
In the Forwards market, the rate weakened in the 1-month (-0.1 to N398.27 against the dollar ) contract, strengthened in the 6-month (+0.1per cent to N416.23 against the dollar ) contract and was flat in the 3-month (N405.61 against the dollar) and 1-year (N435.28 against the dollar ) contracts.
Analysts at Cordros capital stated that, “Given the expected pressure on the external reserves amid weak portfolio inflows, we expect the naira to depreciate closer to its fair value implied by long-run REER (N453.67) in the medium term.
“Our baseline expectation is that the CBN will depreciate the naira by 5.3per cent to N400 against the dollar in the interbank market and 5.1per cent to N415 against the dollar at the I & E FX.”
Meanwhile, the overnight (OVN) rate expanded by 950 basis points w/w, to 10.5per cent.
Cordros Research explained further that, “The rate was depressed for most of the week, as the system was awash with liquidity from FAAC disbursements (N341.90 billion), OMO maturities (N201.94 billion), FGN bond coupon payments (N110.98 billion) and FX Retail refunds.
“However, debits in the latter part of the week for CRR, FGN bond PMA (N170.36 billion) and CBN’s weekly auctions – OMO (N170.00 billion) and FX -triggered the eventual expansion in the funding rate.
“Next week, barring any significant mopping-up activity from the CBN, we expect the rate to trend southwards following inflows from OMO maturities (N190.15 billion) and FGN bond coupon payments (N82.86 billion).
“The Treasury bills secondary market remained bearish this week due to profit-taking at the tail end of the week on some mid and long-dated instruments.
“Thus, average yield across all instruments expanded by eight basis points to 0.7per cent. We highlight that, the overall market was dragged by the OMO segment (+13 basis points to 0.9per cent), where offshore investors sold off auction bills at the secondary market.
“Elsewhere, trading in the NTB segment was mixed, with mostly retail trades consummated throughout the week. Average yield in the segment expanded slightly by 1bp to 0.5per cent.
“At the OMO auction, the CBN offered and fully allotted N170.00 billion to market participants across the 103, 180 and 362-day bills, with stop rates unchanged at 1.51 per cent, 4.34 per cent and 5.74 per cent, respectively.
“Considering the relatively lower inflows expected in the system next week, we expect low demand for T-bills and a slight expansion in yields from current levels. At the NTB segment, we expect market focus to be shifted to the PMA on Wednesday, where the CBN is expected to roll over N187.30 billion worth of instruments.”
