Naira depreciates by 1.3% to N410.00/$
The naira weakened by 1.3 per cent to N410.00 against the dollar at the Investors & Exporters Foreign Exchange (I&E FX) window on its week-on-week (w/w) performance.
The local currency also dropped by 1.1per cent wow to N478.00 against the dollar in the parallel market.
The total turnover traded at I&E window, was $228.55 million, with most trades consummated within the N390.00 – 424.15/$ band.
However, the foreign reserves sustained its descent, as it dipped by $177.39 million on w/w to $35.58 billion.
Analysts at Cordros capital stated that, “Given the expected pressure on the external reserves amid weak portfolio inflows, we expect the naira to depreciate closer to its fair value implied by the long-run REER (N453.67) in the medium term.
“Our baseline expectation is that the CBN will depreciate the naira by 5.3 per cent to N400/$ in the interbank market and 5.1per cent to N415/$ at the I & FX window.”
Meanwhile, the overnight (OVN) expanded by 15.75basis points w/w, to 20.5per cent.
The rate was depressed at the beginning and middle of the week, following inflows from OMO maturities (N207.84 billion) and FX retail refunds into the system.
However, provisioning for CRR by banks, and FGN bond (N80.55 billion), OMO (N180.00 billion) and FX auction debits at the twilight of the week pressured system liquidity and drove the rate northwards.
They added that, “In the coming week, inflows from OMO (N472.22 billion) and NTB (N128.22 billion) maturities, as well as FGN bond coupon payments (N49.89 billion), will hit the system. Consequently, we expect the overnight lending rate to contract.
“The Treasury bills secondary market turned bullish, as the average yield across all instruments declined by 28 basis points to 4.1per cent.
“As in prior weeks, activities in the OMO secondary market primarily drove proceedings in the broader market, as local banks reinvested excess liquidity from OMO maturities – especially at the long (-17basis points) end of the curve.
“Thus, the average yield in the space contracted by 32basis points to 6.4per cent. At this week’s OMO auction, the CBN maintained stop rates across the three tenors, selling N180.00 billion worth of bills to market participants.
“Elsewhere, trading in the NTB secondary market was relatively muted (average yield increased slightly by 2bps to 1.5per cent) as weak sentiments persisted.
“For next week, we expect the yields on T-bills to maintain the same trajectory, following the ample liquidity expected in the system. Also, we expect quiet trading at the NTB market as participants position for next week’s PMA, where the CBN is expected to roll over N128.22 billion worth of maturities.”
