The naira is expected to remain
relatively stable in the parallel market this week due to the Central
Bank of Nigeria’s (CBN) regular dollar sales to the BDC segment and the
interbank markets, according to analysts at Afrinvest Securities Limited
and Cowry Asset Management Limited.
Last week, the naira traded flat at the
interbank market (N199.10/$1), while the CBN maintained its intervention
rate at N197/$1. In the parallel market, the naira improved to N211/$1
on Wednesday, from N211/$1.
The appreciation was following the sale
of the greenback by the CBN to the BDCs in order to maintain supply in
the parallel market. The apex bank has since the beginning of August
2015, supplied dollars to the BDC operators twice a week.
This, Ayodeji Eboh and his team of
analysts, said was an approach to significantly close the spread between
parallel market and the interbank market rates. Hence, the local unit
has appreciated 6.2 percent month-to-date in the parallel market.
With the apex bank’s unrelenting efforts
to check speculation on the local unit and conserve the reserves with
the use of its demand management policies, the interbank market rate has
been flat at N199.10/$1 since February 2015, shifting the volatility to
the parallel market where the domestic currency has depreciated to a
year high of N240/$1.
However, with the recent volatility
witnessed across the global economy, which saw crude oil prices touching
$42.6pb (-9.5% MTD), PBOC’s devaluation of the yuan and the Chinese
market rout, the naira (flat at N199.10/$1 at the interbank and +6.2%
month-to-date at the parallel market) seemed to have outperformed key
markets in Africa such as South Africa (Rand -4.2% MTD), Ghana (Cedi
–6.2%) and Kenya (Shilling –1.5%) in the month of August.
The low liquidity in the financial
market continued last week, causing money market rates to trend high on
all trading days of the week. With liquidity opening balance of N72.3
billion on Monday, Open Buy Back (OBB) and Overnight (O/N) rates settled
at 35 percent and 37.5 percent after trade.
Liquidity balance opened at N54.9
billion on Tuesday, as a result of the 48-hour requirement for DMBs to
fulfill their forex obligations to the apex bank. Thus, money market
rates further increased to 83.3 percent and 88.3 percent, respectively,
for OBB and O/N rates. Money market rates closed at 100.8 percent (OBB)
and 105.3 percent (O/N) on Wednesday, as no major credit was received
within the financial system.
On Thursday, however, there was a
significant decline in money market rates by 86.3 percent and 89.3
percent to 14.5 percent and 16.0 percent for the OBB and O/N rates,
respectively. This was partly as a result of net inflow on Standing
Lending Facility worth N211.9 billion, which hit the financial system.
On Friday, rates dropped further to 11.0
percent (OBB) and 8.3 percent (O/N) as a result of the improved
liquidity in the system. Hence, OBB and O/N declined 30.0 percent and
40.9 percent, respectively, Week-on-Week.
In addition, due to low liquidity at the
beginning of the week, average yields rose 0.2 percent W-o-W from 15.6
percent to 15.8 percent in the T-Bills market. “In the coming week, we
expect rates to rise marginally due to NNPC withdrawals and probable OMO
auctions,” the analysts at Afrinvest said.
by Hope Moses
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