Naira to continue to appreciate as Yuletide lowers demand on naira

The FSDH Weekly thus forecast that the value of naira to continue its steady appreciation at the foreign exchange market.

We anticipate that the market will remain liquid as maturing bills worth about N60billion and the December allocation from the Federal Allocation Account Committee (FAAC) are expected to hit the system in the week. Consequently, we expect inter-bank rates to drop during the week. We also expect the CBN to continue its mop up exercise. This should lead to a marginal increase in the discount rate on the treasury bills.

At the foreign exchange auctions held last week, the CBN offered a total of $100million from the previous week's figure of $130million leading to a decline of 23.08 percent when compared with the previous week's figure. The amount sold was $56million up by 160.47 percent over the $21.50 sold in the previous week. The marginal rate in the sales of the foreign exchange was N116.80/$1.

The value of the naira appreciated in the official and parallel markets while it depreciated marginally in the inter-bank market. In the parallel and official markets, the value of the naira appreciated by 60 kobo and 16 kobo to close the week at N120.10/$1 and N116.80/$1 from the previous week's figures of N120.70/$1 and N116.96/$1 respectively. In the inter-bank market the value of naira depreciated by four kobo to close the week at N118.07/$1 from the previous week's figure of N118.03/$1.

Generally, tightness gradually returned back into the money market last week in spite of the huge maturing bills worth N115 billion both from the primary market and the secondary market. Cumulatively, the money market (foreign exchange market inclusive) witnessed a net outflow of about N6.54 billion. Consequently, inter-bank rates inched up higher last week when compared with the previous week.

The 7-day NIBOR inched up gradually through the week to close the week at 8.92 percent from the previous week's figure of 7.92 percent. The 90-day NIBOR also inched up during the week but declined towards the end of the week to close the week at 13.13 percent same as the previous week's figure.

At the 91-day Treasury bill auction a total of N5 billion worth of bill was offered, N4.98billion was subscribed, N4.48billion was allotted at a discount rate of 7.6 percent, while a total of N10billion worth of matured bills was repaid into the system. This resulted in a total inflow of N5.52billion into the system.

At the 182-day Treasury bill auction the CBN offered a total of N60billion worth of bills while a total of N30.55 billion worth of bill was initially allotted and N29.45billion was underwritten by Money Market Dealers (MMDs) leading to a total allotment of N60billion at a discount rate of eight percent. A total of N10billion worth of matured bills was repaid into the system.

This led to a total outflow of N50billion from the system.

At the 3-year FGN bond a total of N30billion worth of security was offered while total subscription stood at N66.44billion, leading to over subscription of about 121.47 percent.

The bonds were issued at a coupon rate of 8.99 percent. On the 10-year FGN bond, a total of N20 billion was offered and subscription was at N61.05 billion, this was equally over subscribed by about 205.25 percent.

The bonds were issued at a coupon rate of 11.03 percent.

A total of N35 billion worth of matured bills was also repaid via the 7-day CBN Reverse Repo.

At the secondary segment of the government securities market, various tenured day bills turned out a total of N60 billion worth of maturities that was repaid into the system. The transactions in both the primary market and the secondary market of the government securities led to inflows, outflows and net inflows of N115 billion, N114.48 billion and N521.59 billion respectively.