I & E FX: Naira depreciates by 0.3% to N394.67/% WoW
By Kayode Tokede
Across the Foreign Exchange (FX) windows, the naira weakened against the dollar by 0.3per cent week-on-week (w/w) to N394.67 against the dollar at the Investors & Exporters Foreign Exchange (I&E FX) window.
Total turnover at the I&E FX window increased by 59.9 Week-till-Date (WtD) to $330.67 million, with trades consummated within the N387.10 – 411.05 against the dollar band.
However, the local currency depreciated also by 0.6 per cent to N475.00 against the dollar in the parallel market.
In the Forwards market, the rate was flat in the 1-month (N398.04/$) contract, weakened in the 3-month (-0.5 per cent to N403.33/$) contract and appreciated in the 6-month (+0.3per cent to N416.62/$) and 1-year (+0.2per cent to N435.10/$) contracts.
Meanwhile, the foreign exchange reserves maintained its accretion for the fourth consecutive week, as the gross reserve position grew by $363.61 million w/w to $35.72 billion as at January 13, 2021.
“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/USD in the interbank market and 5.1 per cent to N415 against the dollar at the IEW,” analysts at Cordros capital added,
They expressed further that, “In line with our expectation, the overnight (OVN) rate dipped by 833bps w/w, to one per cent as inflows from OMO (N211.25 billion) and NTB (N125.14 billion) maturities as well as FGN bond coupon payments (N40.68 billion) outweighed outflows for the Federal Government Cash Remittance provisioning by banks (c. N100.00 billion) as well as the CBN’s weekly OMO (N80.00 billion) and FX auctions.
“We expect the OVN rate to remain depressed next week as inflows from OMO maturities (N226.31 billion) and FGN bond coupon payments (N40.68 billion) hit the system.
“Trading in the Treasury bills secondary market was mixed as risk-off sentiments persisted amidst the low yields on offer.
“ Specifically, average yield across all instruments pared by 1bp to 0.7per cent.
“At the NTB segment, average yield expanded by 8bps to 0.5per cent, as market participants sold off early in the week in anticipation of higher yields at the NTB PMA.
“At the PMA, the CBN offered N232.36 billion worth of instruments, but only allotted 46.1per cent of the amount on offer. Precisely, the allotment was split between N15.92 billion of the 91-day, NGN25.37 billion of the 182-day and N65.93 billion of the 364-day – at respective stop rates of 0.5000% (previously 0.0350%), 1.000% (previously 0.5000%), and 1.5000% (previously 1.2100%). Elsewhere, average yield at the OMO segment declined by 7bps to 0.8% as local banks reinvested OMO maturities.”
