Foreign Reserves increase to $34.18bn — CBN
By Kayode Tokede
The Central Bank of Nigeria (CBN) has disclosed that the country’s foreign reserves increased to $34.18billion as at September 2, 2021.
Analysts at Cordros capital in a report said the foreign exchange reserve sustained its weekly accretion, closing higher by $438.35 million in its wee-on-week (w/w) performance to settle at $34.10 billion as at September 1, 2021.
The naira appreciated by 0.1per cent w/w to N411.50 against the dollar at the Investors & Exporters Foreign Exchange (I&E FX) window but depreciated by 1.1per cent w/w to N530.00 against in the parallel market.
At the I & EFX window, total turnover (as of 2nd September 2021) increased by 19per cent WTD to $926.51 million, with trades consummated within the N400.00 – 449.99/USD band.
They noted that, “We expect improved liquidity in the I & EFX over the medium term, given our expectation of increased oil inflows in line with the rise in crude oil prices and inflows from FCY borrowings ($6.18 billion) and IMF SDR ($3.40 billion).
“Accordingly, we expect the naira to remain relatively range-bound (N410.00 against the dollar – N415.00/USD) at the I & FX window.
“The overnight (OVN) rate expanded by 500basis points w/w to 13.5per cent. The rate remained in the single-digit territory for most of the week following a higher net liquidity position (this week’s average: N373.87 billion vs last week: N43.46 billion) supported by OMO maturities (N57.00 billion).
“However, the eventual expansion was driven by debits at the latter part of the week for CRR and the CBN’s weekly FX and OMO (N50 billion) auctions.
“In the coming week, we expect the OVN rate to remain relatively range bound as expected inflows from OMO maturities N170billion is likely to offset funding pressures for CBN’s weekly auctions.
“The Treasury bills secondary market traded with bullish sentiments following higher demand on the back of the improved system liquidity. Thus, the average yield contracted by 13basis points to 5.4per cent.
“Across the market segments, the average yield at the NTB segment declined by 34basis points to 4.6per cent but expanded by eight basis points to 6.1% at the OMO segment.
On Thursday, the CBN sold NGN50.00 billion worth of OMO bills to market participants and maintained the stop rates across the three tenors, as with prior auctions (82-days: seven per cent, 152-days: 8.5per cent, and 327-days: 10.1per cent).
“Also, the CBN also rolled over Special Bills maturities worth NGN4.20 trillion at 0.5per cent for three tenors of 30, 60 and 90 days.
“In the coming week, we envisage lower average yields as market participants take positions ahead of further declines in auction stop rates. Also, we expect the NTB market to trade quietly as the CBN is set to roll over N138.17 billion worth of instruments.
“Bullish sentiments persisted in the Treasury Bonds secondary market as investors continue to cherry-pick attractive instruments across the curve. Specifically, the average yield declined by 11bps to 11per cent.
“Across the benchmark curve, the average yield declined at the short (-10bps), mid (-9bps), and long (-12bps) segments following investors’ interest in the JAN-2022 (-53bps), FEB-2028 (-15bps) and MAR-2035 (-35bps) bonds, respectively.
Next week, we maintain our expectations of lower average yields in the face of limited supply and deliberate efforts by the DMO to moderate borrowing costs for the government.”
