Naira trades flat at I & E FX window at N411.50/$
By Kayode Tokede
The Naira stayed flat at N411.50 against the Dollar at the Investors & Exporters Foreign Exchange (I&E FX) window but appreciated by 1.4per cent to N510.00 against the Dollar in the parallel market.
At the I & E FX, total turnover (as of 6th August 2021) decreased by 37.8per cent Week-Till-Date (WTD) to $489.19 million, with trades consummated within the N400.00 – 427.95 against the dollar band.
Meanwhile, the foreign reserves closed higher for the third consecutive week, as the gross reserves position increased by $137.23 million week-on-week (w/w) to $33.54 billion as at August 4, 2021.
In the Forwards market, the rate appreciated across the 1-month (+0.3per cent to N413.70/$) and 3-month (+0.5per cent to N417.79/$), 6-month (+0.5per cent to N424.01/$) and 1-year (0.3per cent to N436.43/$) contracts.
According to analysts at Cordros capita, “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 ($6.20 billion) and IMF SDR ($3.40 billion).
“Accordingly, we expect the Naira to remain relatively range-bound (N410.00/$ – N415.00/$) at the I & E FX.
The overnight (OVN) rate expanded by 12.75ppts w/w to 20.5 per cent. The rate remained in the single-digit territory through most part of the week following a higher net liquidity position (this week’s average: N219.50 billion vs last week: N80.69 billion) supported by OMO maturities (N19.20 billion). However, the eventual expansion was driven by debits at the latter part of the week for CRR debits and CBN’s weekly FX auction.
“We expect tighter liquidity in the system in the coming week, as funding for CBN’s weekly auctions are likely to outweigh expected inflows from OMO (N5.00 billion) maturities.
“The Treasury bills secondary market closed the week on a bullish note following the healthy system liquidity in the week.
“Thus, the average yield across all instruments contracted by 64bps to 6.8per cent. Across the market segments, the average yield at the OMO segment contracted by 91bps to 7.7 per cent, as lesser funding pressures influenced improved demand for bills. Similarly, the average yield at the NTB segment contracted by 27basis points to 5.6 per cent.
“We envisage the yield on T-bills will settle lower in the coming week, as investors improve buying activities in anticipation that issuances of instruments will reduce given the recent developments on foreign currency denominated borrowings (Eurobond issuance).
“Also, we expect quiet trading in the first few days at the NTB market as participants position for the mid-week PMA, with the CBN set to roll over N51.49 billion worth of maturities.
“Trading in the Treasury bonds secondary market sustained its bullish run as the average yield contracted by 13basis points to 11.9 per cent. We note that there was improved demand in this space as investors continued to select attractive offers across the different segments of the curve.
“Across the benchmark curve, the average yield declined at the short (-11 basis points), mid (-18 basis points) and long (-5 basis points) ends following investors’ interest in the JAN-2022 (-28 basis points), NOV-2029 (-27 basis points) and MAR-2050 (-13 basis points) bonds, respectively.
“Next week, we still expect lower average yields as investors continue to cherry-pick relatively attractive instruments. In the longer term, we also maintain our view of tempered yields in the second half of the year, given our expectations of limited supply and deliberate efforts by the DMO to reduce borrowing costs for the government.”
