As markets and businesses resume today after the festive holidays, analysts anticipate continued pressure on the nation’s currency, the naira, in spite of the measures put in place by the Central Bank of Nigeria (CBN) to defend it.
Amid several challenges, the naira relative to the dollar closed the year 2014 on a weaker status. For instance, the Nigerian 2014 budget benchmark stood at USD77.5 per barrel, however, crude oil price on the international market closed at USD59.44 per barrel as at Monday, December 29, 2014, according to a report by Cowry Asset Management Limited.
The CBN budged to the devaluation pressure hence naira was devalued at the official market to N168/USD from N155/USD. Significant changes were also made to how dollar is supplied in the market such as reduction in dollar sales by the central bank to bureaux de change (BDC) from USD50,000 to USD15,000 and the removal of the 1% foreign exchange trading position of banks. On a year-to-date basis, the naira moderated 8.39% to N168/USD on the official market. At the interbank market segment, the naira weakened by 15.55% to N184.83/USD. Similarly, at the BDC and parallel market segments, the naira slid relative to the dollar by 10.82% and 10.40% to N189.50/USD and N191/USD.
At the money market segment, inter-bank rates are expected to moderate following treasury bills inflows which would offset the outflow.
In line with expectations, Nigerian interbank interest rates moderated amid lower level of business activities occasioned by the festive holidays. The Nigerian Interbank Offered Rates for the overnight, 1 month, 3 months and 6 months’ tenors, declined, respectively, to 11.54% (from 11.85%); 14.68% (from 14.68%), 15.36% (from 15.56%), and 16.06% ( from 16.07%).
This week, treasury bills worth N156.40 billion will be auctioned via the primary market viz: 91- day bills worth N20.15 billion, 182- day bills worth N50.40 billion and 364- day bills worth N85.85 billion. Also 136-day bills worth N249.32 billion will mature via open market operations.
“This week, we expect a boost in bond prices at the OTC bond markets as expected boost in liquidity spurs demand for fixed income securities”, analysts at Cowry Asset have said.
Last week, the Federal Government bond prices moved heterogeneously at the local over the counter market. The 10-year, 16.39% FGN January 2022 paper lost N0.10 (yield rose to 15.32% from while the 5-year 15.10% FGN April 2017 bond pulled back by N0.05 (yield advanced to 15.17% from 15.15%).
However, the 7-year, 16.00% FGN June 2019 instrument advanced by N0.30 (yield declined to 15.27% from 15.37%); while the 3-year, 13.05% FGN August 2016 debt strengthened by N0.35 (yield decreased to 15.16% from 15.39%). The 20-year, 10.00% FGN July 2030 bond closed steady.
At the international bond market, the Federal Government Eurobond prices declined across all maturities amid sustained decline in Nigeria’s international reserves: the 6.75% FGN January 2021 note lost USD0.26 (yield increased to 6.08%) while the 5.13% FGN July 2018 debt decreased USD0.13 (yield increased to 5.01% from 4.87%).
Similarly, the 6.38% FGN July 2023 bond shed USD0.35 (yield rose to 6.45% from 6.40%).
