Obinna Chima with agency report
The naira depreciated marginally to N284.83 to a dollar on the second day of trading on the interbank spot market on Tuesday, as against the N281.85 at which it closed on Monday, even as the Central Bank of Nigeria (CBN) intervened for the second day in a row by selling dollars to the market in order to trigger trading between banks due to liquidity concerns, Reuters quoted traders as stating.
In total, the central bank sold around $100 million in the interbank market, according to CBN spokesman Isaac Okorafor. This followed an auction of $4.02 billion on Monday — when the naira slumped 30 per cent after the central bank abandoned its peg.
However, liquidity concerns pushed up the overnight tenor of the Nigerian Interbank Offered Rate (NIBOR) to a record 60 per cent during intra-day trading, but ended the day at 51 per cent, as commercial lenders expected the central bank to debit them around N1.2 trillion to cover hard-currency purchases. Also, the secured open buy back rate (OBB) stood at 45 per cent yesterday.
Similarly, Nigeria’s dollar-denominated bonds rose as much as half a cent yesterday.
The 2021 issue gained 0.51 cents to trade at 99.760 cents in the dollar – its highest level since early November, according to Tradeweb data. The 2023 issue rose 0.40 cents to 96.150 cents, its highest level in more than 10 months.
Also, data from the FMDQ yesterday showed that on the forwards market, while the exchange rate for the 7-day forward yesterday was N284.05/$1; 14-day – N287.30/$1; 1-month – N292.70/$1; 2-month -N297.82/$1; 3-month – N302.13/$1; 6-month –N302.13/$1; and one-year rate at N307.95/$1.
The central bank had on Monday conducted a Special Secondary Market Intervention Sales (SMIS) to clear the backlog of $4.02 billion pent-up demand for forex. According to the CBN, it sold $532 million on the spot market and $3.487 billion in the forwards market. A breakdown of the $3.487 billion forward sales by the central bank showed that $697 billion was for one month (1M), $1.22 billion for two months (2M) and $1.57 billion for three months (3M).
In its assessment of development on the NIFEX, the Financial Derivatives Company Limited in a report yesterday stated that there was now a perfect market structure, just as it revealed that the present liquidity in the market was 600 per cent higher than what it was in April. It added that with the open market, there is now transparency in the market.
It however stressed that forex policy must complement trade policy, stating that forex policy alone was not the silver bullet.
Meanwhile, on the parallel, the naira closed at N335 to a dollar yesterday, stronger than the N345 to a dollar on Monday.
According to Bloomberg, Nigeria’s benchmark stock index also climbed 2.3 per cent to 29,442.71, its highest close since October 29, 2015 and reversing Monday’s 1.6 per cent decline.