The current total value of subscribed Central Bank of Nigeria’s (CBN) naira settled future contracts for 12 different maturities stood at $1.7 billion with the NG/US April 26 2017, as the most subscribed at a value of $658.6 million.
This, according to analysts at Afrinvest Securities Limited, is unsurprising as the instrument was previously trading at N210/$ before it was recently reviewed to N260/$.
“Until the supply of FX improves significantly at the interbank market, the mounting demand may continue to pressure rates downwards,” the analysts said.
The local currency is expected to trade strong this week as deposit money banks supply dollar to Bureau De Change operators that funded their accounts last week.
BusinessDay investigation shows that BDCs who funded their accounts on Thursday and Friday were not able to get supply last week due to internal mechanism being put in place by the banks.
Further investigation shows that about six banks have indicated interest to sale dollar from the proceeds of international money transfers as directed by the CBN.
The CBN had in circular, signed by Gotring W. D, acting director, trade and exchange department, directed authorised dealers who were agents of approved international money transfers operators to sell foreign currency accruing from inward money remittances to licensed BDCs with immediate effect.
Aminu Gwadabe, acting president, Association of Bureau De Change Operators of Nigeria (ABCON), told BusinessDay by phone that the development would strengthen the naira, which fell to a record low of N400 against the dollar on Thursday.
The nation’s currency depreciated last week against the dollar in all foreign exchange market segments as a result of supply shortage of forex to end users.
This follows a 0.71 percent week-on-week decline in FX reserves to $26.03 billion as of Wednesday on the back of a 0.48 percent w-o-w decline in crude oil prices to $39.60 a barrel as of Thursday, according to OPEC’s reference basket price.
On average, the local currency depreciated at the interbank foreign exchange market by 1.38 percent to average N318.41/$. Similarly, the naira also depreciated against the greenback at the BDC and the parallel market segments by 2.76 percent and 2.66 percent to average N381.25/$ and N388.25/$, respectively, although black market rates were observed to have crossed the N400/$ during the week.
However, analysts at Cowry Asset Management Limited expect sustained pressure on the naira as businesses scramble for dollar to meet their obligations to suppliers.
At the money market, the analysts anticipate stability in interbank lending rates on anticipated inflows. Meanwhile, Nigerian Interbank Treasury Bills True Yields (NITTY) increased for most maturities, as investors sold off their holdings amid attractive yields – yield on 1 month, 3-months and 6-months bills rose to 15.82 percent (from 14.69%), 17.07 percent (from 15.20%) and 19.12 percent (from 18.87%), respectively.
Nigerian interbank money market increased following aggressive CBN mop-up of liquidity from the banking system through the auction of treasury bills worth N415.51 billion – 92.66% higher than N215.67 billion auctioned in the preceding week.
Specifically, CBN auctioned 91-day bills worth N45.18 billion (Stop Rate, 15.4% higher than 14.14% in previous auction); 182-day bills worth N80 billion (SR at 18.06%, from 15.48%); 364-day bills worth N120 billion (SR at 18.5%, from 16.48%); 185-day bills worth N72.89 billion (SR, 18%); and 353-day bills worth N97.44 billion (SR, 18.5%).
Consequently, NIBOR for overnight funds, 1 month, 3 months and 6 months increased to 20.04% (from 4.56%), 17.24% (from 15.36%), 19.27% (from 17.17%) and 21.65% (from 19.47%), respectively.
