Foreign reserves drop by $111.56m to $34.61bn
The nation’s foreign reserves droped by $111.56million to $34.61billion as at Friday, according to the Central Bank of Nigeria (CBN).
The drop makes it the fourth consecutive week decline of the nation’s foreign exchange buffer.
However, the naira depreciated by 0.3per cent to N411.67 against the Dollar and by 0.2per cent to N484.00 against the Dollar at the Investors &Exporter Foreign Exchange window (I & FX) and parallel market, respectively.
According to analysts at Cordros securities, “We expect improved liquidity in the I & FX window over the medium term, given higher oil prices and an expected increase in crude oil production volume.
“Accordingly, we expect the naira to remain relatively range-bound (N410.00/Dollar – N415.00/Dollar) at the I& FX .
“Similarly, we believe the CBN will devalue the naira by 5.3per cent to N400.00/Dollar at the interbank market to narrow the gap with the I & FX window rate.”
The overnight (OVN) rate expanded by 13.63 ppts w/w to 28.9per cent as debits for CRR and CBN’s weekly OMO and FX auctions offset inflows from OMO maturities (N90.00 billion).
The Treasury bills secondary market remained bearish this week, as the liquidity squeeze in the system drove sell-offs by market participants.
As a result, the average- yield across all instruments expanded by 14basis points to 7.1 per cent. Across the market segments, the average yield increased by 23basis points to 8.6 per cent at the OMO segment and by 21bps to 5.1 per cent at the NTB segment.
At the NTB auction, the CBN offered instruments worth N117.56 billion – N24.67 billion of the 91-day, N10.00 billion of the 182-day and N82.89 billion of the 364-day – and ultimately allotted N138.98 billion, 18.2 per cent higher than offered.
The stop rates at the auction increased by 50 basis points on the 91D bill but was unchanged at 3.50 per cent and 9.75 per cent on the 182D and 364D bills, respectively.
The auction was oversubscribed with a subscription level of N230.89billion, translating to a bid-cover ratio of 1.7x (previous auction: 1.9x).
“We see scope for the average yield of T-bills to trend higher next week, as we expect the dearth of liquidity in the financial system to persist,” analysts at Cordros Securities said.
The Treasury bonds secondary market closed on a bullish note, as investors cherry-picked on attractive yields at the mid and long segments of the curve.
Consequently, the average yield contracted by eight basis points to 12.3 per cent.
Across the benchmark curve, the average yield declined at the mid (-8bps) and long (-14bps) segments as investors demanded the MAR-2027 (-10bps) and MAR-2050 (-24bps) bonds, respectively. However, the short end was flat.
“We expect investors to resume sell-offs on Treasury bonds in the coming week, as we expect the negative sentiments in the market to persist.
“Thus, we maintain our view of higher bond yields in the short term. Farther into the month, we highlight that the release of key macro indicators will shape market sentiments and the direction of yields.
“Such macroeconomic indicators include April 2021 CPI (Cordros Forecast: 18.75%), Q1-21 GDP (Cordros Forecast: +0.94%) and the MPC’s rate decision, which will be largely influenced by the outcome of the Q1-21 GDP number,” they added.
