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Increased I&E Forex Inflow Boosts Naira Value



Activities at the Nigeria Autonomous Foreign Exchange (NAFEX) market picked up last week as $1.292 billion was traded on the Investors’ and Exporters’ window to compliment the $210 million that was injected into the market by the Central Bank of Nigeria (CBN).

The increased inflow had seen the value of the naira gain strength at the I&E window as well as the bureau de change market. At the I&E window, the naira appreciated by seven kobo to N361 per dollar from N361.07 which it sold in the prior week.

From N360 to the dollar which the naira sold at the BDC market at the beginning of last week the currency firmed to N359.5 per dollar. Volume of dollars that came in through the I&E window had risen from $787.19 million the previous week and had defied the four days trading to see an inflow of $1.292 billion.

CBN had intervened in the market only once last week offering $100million to authorized dealers in the wholesale segment of the market, while the Small and Medium Enterprises (SMEs) segment got boosted with the sum of $55 million.  This is compared to the two interventions of the previous week when it pumped %553.06 million into the foreign exchange market.

Activity level also improved at the Futures market as the total value of open contracts on the naira settled OTC futures in the FMDQ OTC future market rose 1.8 per cent to $4.57 billion from $4.49 billion the prior Friday. The NOV-2018 instrument with a total market value of over $638.9 million was the most subscribed while the APR-2019 instrument was the least subscribed with a total market value of $72.3 million

Analysts say they expect rates to continue to trade within tight bands in the near-term hinging on CBN’s unwavering commitment and ability to maintain stability and liquidity in the foreign exchange market in view of the outcome of the OPEC meeting, the current 2018 budget oil price benchmark at $51 per barrel with an average production of 2.3mbpd and the optimistic economic outlook on Nigeria.

The biannual meeting of OPEC in Vienna, Austria which began last week will be making a decision on either unwinding or sustaining the 18-month oil production cut deal which began in January 2017. This is expected to influence global oil price which currently stands at $74.04 per barrel and could further affect the Nigerian external reserves of $47.6 as crude oil accounts for a large proportion of the nation’s foreign exchange earnings.

Meanwhile, activities in the money market as largely mixed this week, as movements in system liquidity, stoked by maturing Open Market Operation and Treasury bills as well as liquidity mop ups, guided rates in the market during the week. The Open Buy Back (OBB) and Overnight (OVN) rates in the money market declined during the week while the average rate across benchmark tenors in the Treasury bills market trended northwards.

Movement in system liquidity during the week was mixed, rising on two of four trading days. As a result, system liquidity rose to N842 billion from N812.1 billion in the preceding week following a total of N66.7 billion and N377.6 billion worth of Treasury Bills and OMO repayments respectively that hit the system last week.

While there would be no Treasury bills maturing, a total of N183.3 billion worth of OMO maturities is expected to hit the system and analysts the apex bank will sustain its trend of liquidity mop ups and money market rates could trend higher.





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