Pressure on the naira extended from the black market to the official end of the foreign exchange market as the dollar exchanged for as high as N632 to the dollar on the Investors’ and Exporters’ window last week.
Data from the FMDQ website showed that spot rate for the greenback sold as high as N632 to the dollar with the lowest rate being N410 to the dollar. At the end of trading last week Friday, the exchange rate at the official window had declined marginally by 0.18 per cent to N464.51 to the dollar from N463.75 which it started the day.
This brings the total depreciation of the naira during the week to N1.51 or 0.33 per cent week on week to close at from N463 with which it started the week.
Founder of Nairametrics,, Ugo Obi-Chukwu, speaking on the issue at the weekend, noted that “if you look a the FMDQ website on Friday, someone did buy at N632. So what does that tell you? That is indicative of where the official rate is likely going to which is not too far from the black market rate.”
According to analysts at Cowry Research, demand pressure in the foreign exchange market is on an upward trajectory as foreign exchange users such as manufacturers, importers, students and travellers begin their prowl for alternative sources.
This is as traders continue hoarding the dollar while some deposit money banks also stifle the availability of the Naira to Nigerians.
Consequently, the naira traded in a weakened sentiment at the alternative black market as it depreciated by N12 or 1.59 per cent week on week to N767 from N755 per dollar due to lingering scarcity of the greenback.
At the Interbank Foreign Exchange Forward Contracts market, the spot exchange rate remained unchanged closed at N462 to the dollar.
Cowry Research analysts noted that “in our analysis of the naira/ dollar exchange rate at the weekly Naira FX Forward Contracts Markets, the naira reigned with positive appreciations across all forward contracts tenor.
“Consequently, the naira strengthened by +1.45%, +4.29%, +6.22%, +9.15% and +6.27% w/w to close at N470.76/$1, N478.91/$1, N485.78/$1, N506.61/$1 and N538.72/$1 at all tenor contracts respectively.
“Next week, we expect the naira to trade in a relatively calm band across various market segment barring any market distortion and as the apex bank continues its weekly foreign exchange market intervention to defend the value of the Naira.”
Meanwhile, the overnight (OVN) rate dipped by 238bps to 13.3 per cent as inflows of N407.13 billion from FAAC allocation and FGN Bond coupon payments of N17.87 billion kept the financial system afloat with liquidity.
Accordingly, the average system liquidity last week week settled at a net long position of N339.93 billion, relative to the net short position of N29.89 billion in the prior week.
Analysts at Cordros Research note that, barring any significant outflows from the system this week, “we expect the OVN rate to continue to trend downwards, as the inflows of N20 billion from OMO maturities and FGN bond coupon payment of N5.63 billion are expected to support the already healthy liquidity system.”
Activites at the FGN bonds secondary market were bullish last week, as investors cherry-picked attractive bonds across the curve, particularly at the mid and long segments of the naira curve.
Consequently, the average yield across all instruments contracted by 8bps to 14 per cent. Across the benchmark curve, the average yield dipped at the short (-25bps) and long (-2bps) ends, as investors demanded the MAR-2024 (-88bps) and JAN-2042 (-10bps) bonds, respectively. Conversely, the average yield closed flat at the mid segment.
