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Money and Fixed Income

Naira slips amid rising forex reserves

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Nigeria FX reserves dip further $41.14bn

The accretion to Nigeria’s foreign exchange reserves was sustained for the second consecutive week, as it closed higher by $441.63 million week on week at $34.70 billion as at 8th September 2021.

This however could not save the naira from further plummeting against the dollar and other hard currencies at both the official and alternative windows.

During the course of the week, the naira depreciated by 0.1 per cent and 2.8 per cent week on week to N412.00 to a dollar and N545.00 against the dollar at the I&E window (IEW) and parallel market, respectively.

Data obtained from the FMDQ showed that at the IEW, total turnover declined by 39.7 per cent WTD to $635.71 million, with trades consummated within the N400.00 – 430.00/USD band.

In the forwards market, contracts reflected broad appreciations relative to the USD. The 1-month  and 3-month contracts appreciating by 0.1 per cent each N412.75/dollar and N417.31/dollar respectively.

Similarly, the 6-month and 1-year contracts advanced by 0.2 per cent to N423.01/dollar and 0.5 per cent to N434.22/dollar in that order.

In a forecast note to Business Metrics, analysts at Cordros Capital are banking on improved liquidity in the IEW over the medium term this week.

They anchored this expectation on increased oil inflows in line with the rise in crude oil prices and inflows from FCY borrowings amounting to $6.18 billion and IMF SDR valued at $3.40 billion.

“Accordingly, we expect the naira to remain relatively range-bound (N410.00/dollar – N415.00/dollar at the IEW,” they forecast.

Treasury Bills

The Treasury Bonds secondary market traded with mixed sentiments, last week albeit with a bearish bias, following the higher NTB stop rates amid investors’ less aggressive cherry-picking activities.

Consequently, the average yield expanded by 5 basis points (bps) to 11.1 per cent. Across the benchmark curve, the average yield declined at the short (-3bps) and mid (-4bp) segments following demand for the APR-2023 (-54bps) and MAR-2027 (-12bps) bonds, respectively.

However, it expanded at the long (+18bps) end as investors upwardly repriced the MAR-2036 (+48bps) bond.

As a new trading week begins today, the market direction will be determined by the outcome of the NTB auction, Central Bank of Nigeria’s Monetary Policy Committee (MPC) decision and  August inflation result.

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