Naira drops by 0.1% to N385.67/$ in one week

The naira weakened against the dollar by 0.1per cent week on week (w/w) to close at N385.67 against the dollar at the Investors & Exporters Foreign Exchange (I&E FX) window.

It strengthened significantly by 8.4per cent to N477.00 against the dollar in the parallel market off the improved supply from speculative traders as well as retail users in anticipation of renewed supply from the Central Bank of Nigeria (CBN).

However, the foreign reserves grew slightly despite the CBN’s interventions across the various foreign exchange windows. Precisely, reserves grew by $5.99 million w/w to $35.67 billion.

“Despite the CBN’s stronger commitment towards exchange rate unification, we still see legroom for the currency to depreciate further in the medium-to-long term, at least towards its REER derived fair value. Our prognosis is hinged on,  the widening current account (CA) position, (2) currency mispricing, which could induce speculative attacks on the naira, and (3) the resumption of FX sales to the BDC segment of the market which should place an additional layer of pressure on the reserves,” analysts at Cordros Research stated.

Meanwhile, the overnight (OVN) rate crashed by 12.65 points w/w to 2.3per cent, as inflows from OMO maturities (N321.48 billion) outweighed outflows for OMO (N100.00 billion) and FX auctions.

The Treasury bills secondary market traded with bullish sentiments, as average yield across all instruments contracted by 23basis points to 2.5per cent.

The overall market was largely influenced by activities in the OMO segment (-31basis points to 2.8per cent), as local players picked on the relatively attractive yields in the space, and covered for lost bids at the OMO auction. Elsewhere, yields at the NTB segment contracted by 11bps to 1.9 percent, due to sustained demand by retail investors.

At the OMO auction, the CBN offered bills worth N100.00 billion, with allotments of N10.00 billion of the 82-day, N10.00 billion of the 180-day, and N80.00 billion of the 355-day – at respective stop rates of 4.86per cent (previously 4.87 percent), 7.68per cent (previously 7.68 percent), and 8.94per cent (previously 8.94 percent).