Naira Gains Marginally Across Market Segments

The naira appreciated slightly against the United States dollars across various segments of the foreign exchange (forex) market yesterday on sustained supply of the greenback by the Central Bank of Nigeria (CBN).

Specifically, on the Bureau De Change (BDC) segment, the local currency strengthened by 0.82 per cent to close at N361 to a dollar, amid sustained series of special interventions by CBN.

Also, the naira appreciated at the parallel market segments by 1.09 per cent to close N364 to a dollar on Friday.

In addition, on the Investors and Exporters’ forex window (I&E), the naira chalked up 0.03 per cent to close at N365.23, amid increased dollar supply.

Analysts at Cowry Asset Management Limited, disclosed this in a report.

However, the nation’s currency depreciated slightly on the interbank foreign exchange market by 0.02 per cent, to close at N359.24 to a dollar, despite the injections of a total of $509.82 million by CBN into the foreign exchange market.

A breakdown of the intervention showed that the regulator sold a total of $210 million via the Secondary Market Intervention Sales (SMIS) of which: $100 million was allocated to wholesale SMIS, $55 million was allocated to SMEs and $55 million was sold for invisibles.

In addition, as of Friday it sold another $299.82 million via SMIS and CNY143.60 million.

Furthermore, the Cowry Assets report showed that the naira/USD exchange rate fell (that is the naira appreciated) for most of the foreign exchange forward contracts as the 2-month, 3-month and 6-month fell by 0.01 per cent, 0.06 per cent and 0.03 per cent respectively, to close at N372.80/$, N376.30/$ and N387.07/$ respectively. However, spot and 1-year forex rate rose by 0.02 per cent and 0.18 per cent to close at N306.90/$ and 415.27/$respectively.

“In the new week, we expect stability in the naira/USD rate in most market segments, especially at the BDC Segment, as CBN sustains its special interventions,” the report stated.

Bond Market

The value of FGN bonds traded at the over-the-counter (OTC) segment moved in mixed directions across maturities tracked. That is, the 20-year, 10% FGN JULY 2030 note and 7-year, 16.00% FGN JUN 2019 paper increased by N0.25 and N0.09 respectively.

Their corresponding yields moderated to 15.73% (from 15.79%) and 14.66% (from 14.87%) respectively.

However, the 10-year, 16.39% FGN JAN 2022 debt and 5-year, 14.50% FGN JUL 2021 bond prices decreased by N0.13 and N0.02 respectively; their corresponding yields rose to 15.06% (from 15.01%) and 15.78% (from 15.76%) respectively. Elsewhere, the value of the FGN Eurobonds traded at the international capital market rose for all maturities tracked amid renewed bullish activity.

For instance, the 10-year, 6.75% JAN 28, 2021 bond, the 10-year, 6.38% JUL 12, 2023 note and the 15-year, 6.50% NOV 28, 2027 paper increased by $1.12, $2.19 and $2.40 respectively. Their corresponding yields fell to 7.24% (from 7.54%), 8.57% (from 8.91%) and 8.88% (from 9.14%) respectively.

Interbank Naira Market

The CBN sold treasury bills worth N128.18 billion through open market operations (OMO) last week.

The outflows partly offset the inflows from the matured treasury bills worth N551.36 billion. The net inflow majorly contributed to the fall in the Nigerian Interbank Offered Rate (NIBOR) for overnight funds and 3-month tenor buckets amid financial liquidity ease to 25.19%, (from 26.17%) and 15.21% (from 15.32%) respectively.

But NIBOR for 1-month and 6-months rose to 15.38% (from 14.95%) and 15.24% (from 15.23%) respectively, amid a standing Lending Facility worth N862.65 billion, which outweighed the Standing Deposit Facility (SLF) worth N80.83 billion. Meanwhile, increase in NITTY for most maturities tracked was sustained as investors continued to demand for higher yields amid increased risk environment.

The report showed that yields on 1-month, 6-month and 12 months rose to 14.90 per cent (from 14.78%), 14.42% (from 14.33%) and 17.55% (from 17.33%) respectively.

However, yield on 3-months fell to 14.34% (from 14.80%).

This week, treasury bills worth N497.82 billion are expected to mature both in the primary and secondary markets. This is expected to boost financial system liquidity and result in a corresponding downward trend in NIBOR as the expected N60 billion bond auction would not be sufficient to dry up the liquidity from the maturing treasury bills.

Meanwhile, provisional estimates for Nigeria’s Balance of Payments (BOP) in the third quarter (Q3) 2018, showed the overall BOP swinging into a deficit of US$4.542 billion, compared to surpluses of $503.97 million and $2.787 billion recorded in the preceding quarter and corresponding period of 2017, respectively.

This meant that the country’s imports of goods and services in the period under review outweighed its exports.

The central bank of Nigeria disclosed this in its ‘Third Quarter Brief on Balance of Payments Statistics report.

According to the report, the current account balance (CAB) also worsened from a surplus of $4.453 billion in Q2 2018, to a deficit of $3.105 billion in the review period.

The financial account balance indicated an increased net incurrence of financial liabilities of $10.724 billion in the review period as against $2.576 billion recorded in the preceding period.

In a related development, the consumer price index (CPI), which measures inflation increased to 11.28 percent (year-on-year) in November compared to 11.26 percent in the preceding month, according to the National Bureau of Statistics (NBS).

The 0.02 per cent points increase resulted from price increases in all the divisions that constitute the Headline index.

Food inflation stood at 13.30 per cent compared to 13.28 per cent in October while Core Inflation was recorded at 9.80 per cent from 9.90 per cent in the preceding month.

According to the CPI report for November, urban inflation rate increased by 11.61 percent (year-on-year) in November from 11.64 percent recorded in October while the rural inflation rate increased by 10.99 percent in November 2018 from 10.93 percent in October 2018.

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