The Central Bank of Nigeria (CBN) said the country’s foreign reserves sustained its decline, dipping $215.62 million in its week-on-week (w/w) performance to $33.55 billion as at June 24, 2021
Analysts attributed the decline in foreign reserves to CBN intervention in the foreign exchange market.
However, naira depreciated by 0.2 per cent to N411.67 against the Dollar and 0.4per cent to N500.00 against the Dollar at the Investors & Exporters Foreign Exchange (I&E) window and parallel market, respectively.
At the I & E foreign exchange window, a total turnover increased by 2.7per cent WTD to $580.84 million, with trades consummated within the N401.00 – 420.80 against the Dollar band.
According to analysts at Cordros capital, “We expect improved liquidity in the IEW over the medium term, given our expectation of (1) increased oil inflows in line with the rise in crude oil prices, and (2) inflows from FCY borrowings.
“Accordingly, we expect the naira to remain relatively range-bound (N410.00/Dollar – N415.00/Dollar) at the I & E FX.”
The overnight rate expanded by 375 basis points w/w to 23.0per cent as debits for CRR, FGN bond (N325.80 billion) and FX auctions outweighed system inflows from FAAC disbursements (N363.86 billion) and OMO maturities (N15.00 billion).
They expressed that, “This week, we expect system liquidity to remain tight and the OVN rate to trend northwards in the absence of any significant inflows to the system.
“The Treasury bills secondary market extended its bearish run this week, as the tight liquidity in the system persisted.
“Consequently, the average yield across all instruments expanded by 25bps to 8.3per cent.
“Across the market segments, the average yield at the OMO segment closed six basis points higher at 9.7per cent and similarly expanded by 54basis points to 6.9per cent at the NTB segment. Notably, there was no OMO auction yesterday.
“In the coming week, we maintain our view of a higher average yield on T-bills, given that we expect system liquidity to remain strained.
“Also, we expect quiet trading at the NTB market as participants position for next week’s PMA, with the CBN set to roll over N58.86 billion worth of maturities.
“The Treasury bonds secondary market closed the week on a bullish note, as yields adjusted to the lower stop rates at Wednesday’s FGN bond auction.
“Consequently, the average yield expanded by seven basis points to 11.9per cent.
“Across the benchmark curve, the average yield decreased at the mid (-6 basis points) and long (-19 basis points) segments due to investor’s demand for the FEB-2028 (-23 basis points) and APR-2037 (-63 basis points) bonds, respectively.
“However, it expanded at short (+3bps) end following sell-offs of the JUL-2021 (+15bps) bond. At the bond auction, the DMO offered instruments worth N150.00 billion to investors through re-openings of the 16.2884% FGN MAR 2027 (Bid-to-offer: 1.23x; Stop rate: 12.74%), 12.5000% MAR 2035 (Bid-to-offer: 2.55x; Stop rate: 13.50%) and 12.9800% FGN MAR 2050 (Bid-to-offer: 4.48x; Stop rate: 13.70%) bonds. We note that the demand was stronger (subscription: N417.48 billion; bid-to-offer: 2.8x) compared to May (Subscription: N281.97 billion; Bid-to-offer: 1.9x). The DMO eventually allotted instruments worth NGN325.80 billion, resulting in a bid-to-cover ratio of 1.2x.
“Next week, we expect average yields to trend lower, as we expect investors to take advantage of the increased supply in the market and cherry-pick mid and long-dated bonds.”