Foreign reserves drops by $177.7m in March


The Central Bank of Nigeria (CBN) has said the nation’s foreign reserves dropped by $177.million or 0.51 per cent in March to $34.82billion from $34.99billion it opened in the month under review.

In 2021, the foreign exchange buffer dropped by 2.3 per cent from $35.64billion it opened to $34.82billion as at March ending.

Analysts have expressed that the apex bank intervention in the foreign exchange market continued to weaken the foreign reserves amid steady increase in global oil prices.

However, the naira appreciated by 0.2per cent to N409.63 against the Dollar at the Investors & Exporters Foreign Exchange (I&E FX) window last week but remained flat at N485.00 against the Dollar in the parallel market.

At the IEW, total turnover (as of 31st March 2021) decreased by 66.2per cent WTD to $114.14 million, with trades consummated within the N381.00 – 412.00 against the Dollar band.

According to analysts at Cordros capital, “We expect improved liquidity in the IEW over the medium term, given the higher oil prices and an expected increase in crude oil production volume.

“Accordingly, we expect the naira to remain relatively range-bound (N410.00/USD – N415.00/ Dollar) at the I & E 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 & E FX window rate.”

The overnight (OVN) rate jumped by 21.75 basis points w/w to 32.5per cent – its highest level since 16th September 2019 – as outflows from the system for CBN’s weekly OMO (N100.00 billion) and FX auctions, CRR debits and NTB net issuance (N49.15 billion) edged out inflows for OMO maturities (N169.25 billion), FGN bond coupon payments (N69.33 billion) and FX Retail refunds.

The Treasury bills secondary market turned bullish, as the increased liquidity in the system (This week’s average: N256.39 billion vs Last week: N70.91 billion) supported participant’s appetite for shorter-dated T-bills.

Thus, the average yield across all instruments declined by 14 basis points to 5.4per cent.

Across the market segments, the average yield contracted by 17 basis points to 6.4per cent at the OMO secondary market and by 9 basis points to 4.1per cent at the NTB secondary market.

To limit the excess demand in the T-bills market, the CBN simultaneously floated the primary auctions for OMO and NTB bills – the first time in almost two years.

At the OMO auction, the CBN sold N100.00 billion worth of bills to market participants and maintained stop rates across the three tenors, as with prior auctions.

At the NTB auction, the CBN offered N95.68 billion – N10.00 billion of the 91-day, N17.60 billion of the 182-day, and N68.08 billion of the 364-day – in bills and ultimately allotted N144.83 billion, 51.4per cent higher than offered.

The auction stop rates were unchanged at two per cent and 3.50per cent on the 91D and 182D bills but increased by 100 basis points to eight per cent on the 364D bill.