The naira closed last week on a losing streak, plunging in all segments of the foreign exchange (forex) market.
“In the local currency market, the performance of the naira was underwhelming”, said analysts at Afrinvest.
At the parallel market, the base currency (Dollar) appreciated 1.8 per cent week-on-week (w/w) against the price currency (naira) to N1,150.00/$. While at the NAFEM window, the base currency (dollar) rose 0.4 per vent w/w against the naira) to N794.89/$. Meanwhile, activity level in the NAFEM window improved by 11.1 per cent w/w to $817.7 billion from $736.3 billion in the prior week.
At the FMDQ Securities Exchange (SE) FX Futures Contract Market, the total value of open contracts of the Naira remained at $4.2 billion.
“We do not foresee any changes given that CBN has cleared all Non-Deliverable Forwards (NDFs) open contracts, shortly after rendering contracts for tenors between one and twelve months inactive in response to reforms in the NAFEM window. This week, we expect rates across different segments of the market to depreciate following demand-supply imbalance”, said Afrinvest.
At the end of trading last week, system liquidity surged higher by 667.2 per cent to close at N527.1 billion. Nonetheless, the price of liquidity in the banking system, the OPR and OVN rates rose 2.9ppts and 2.4ppts w/w respectively to 23.8 per cent and 24.6 per cent.
At the primary market segment for T-bills, the CBN offered bills worth N211.7 billion across the 91 (N9.7 billion), 182 (N1.8 billion), and 364-day (N199.9 billion) tenors.
Demand was healthy across all ends of the curve as the average bid-to-cover ratio printed at 5.8x due to robust system liquidity. Stop rates across the 91-day and 182- day instrument improved, rising 100bps apiece to 7.0 per cent (91-day) and 11.0 per cent (182-day). Meanwhile, the stop rate remained unchanged at 16.8 per cent in the 364-day instrument.
Meanwhile, the secondary market segment saw a bullish outing as the average yield across all tenors compressed 213 basis points (bps) w/w to 11.2 per cent. The bullish outing was driven by buy interest on the mid (182-day) and long-dated (365-day) instruments as yield saw a decline of 242bps and 221bps w/w respectively. In the coming week, we anticipate healthy liquidity conditions due to FAAC inflow and Bond coupon payment. Consequently, we expect buy sentiment to be sustained at the T-bills secondary market.
Meanwhile, Brent crude oil price futures inched higher by 1.4 per cent to close at $81.75/bbl., as traders remained on the sideline ahead of next week’s Organisation of Petroleum Exporting Countries (OPEC+) meeting.
The anticipated meeting would focus on output cut agreements for 2024, following the recent downturn in oil price due to strong supply from non-OPEC producers. Meanwhile, on the domestic front, Nigeria’s foreign reserves fell 28bps ($91.7m) w/w to $33.2bn (22/11/2023).
