The naira, which strengthened to between N376 and N370 per dollar last week Friday at the black market, is expected to maintain gains as the Central Bank of Nigeria (CBN) sustains its interventions at the foreign exchange market.
Naira on Friday appreciated against the dollar at the investors and exporters window, gaining N1.66k to close at N378.56k, data from the FMDQ show.
However, at the interbank foreign exchange market, the local currency again weakened marginally by N0.05k as it closed at the rate of N305.50k on Friday from N305.45k the previous day.
We expect further stability in the foreign exchange market with possible appreciation against the dollar subject to CBN’s level of intervention, analysts at Cowry Asset Management Limited said.
The CBN has been intervening on the official market to try to narrow the spread between the official interbank and black markets. It has sold over $4 billion since February, improving dollar supply and providing support for the naira.
The weekly movements in most dated forward contracts at the interbank OTC segment suggested future stability of the naira/USD exchange rate despite declining foreign exchange reserves – external reserves decreased month-on-month by 1.73 percent to $30.33 billion as at Wednesday, May 31, 2017. The 1-month, 3 months, 6 months and 12 months forward contracts remained stable week-on-week at N320/USD, N328.07/USD, N336.56/USD and N354.04/USD, respectively.
Furthermore, the spot rate depreciated by 0.03 percent to N305.45/USD, despite the USD7.5 million in intervention sales by CBN to banks.
At the money market last week, the CBN auctioned treasury bills worth N171.15 billion, viz: 91-day bills worth N26.14 billion, 182-day bills worth N11.00 billion and 364-day bills worth N80.00 billion via primary market. Also, 191-day bills and 359-day bills worth N61 million and N2.72 billion were sold via open market operation (OMO).
The outflows were offset by matured treasury bills worth N181.899 billion, viz 91-day bills worth N26.143 billion, 182-day bills worth N11.005 billion and 364-day bills worth N80 billion.
Consequently, NIBOR for overnight funds, 1 month, 3 months and 6 months fell to 9.64 percent (from 14.62%), 19.41 percent (from 20.74%), 22.01% (from 22.39%) and 24.08 percent (from 24.73%), respectively.
The analysts expect improvement in financial system liquidity and resultant moderation in interbank rates this week.