While sustained naira pressure is expected on back of declining foreign exchange reserves, analysts anticipate sustained appreciation in local currency bonds on the back of bargain hunting activities.
Meanwhile, there is expected rise in inter-bank rates on anticipated enhancement in system liquidity via Federation Accounts Allocation Committee (FAAC) disbursements, analysts at Cowry Asset Management Limited said.
Last week, the naira depreciated further against the US dollar, in line with analysts expectation, as Nigeria’s foreign exchange reserves declined week-on-week by 0.50 percent to $29.01 billion as of Thursday, June 18, amid decline in global crude oil prices. OPEC’s reference basket for crude oil plunged 2.56 percent to $60.55, while ICE Brent crude oil price fell by 0.71 percent to $64.34 a barrel as of Thursday, June 18, also.
At the inter-bank foreign exchange market segment, the local currency shed 0.05 percent (or N0.10) against the greenback to N199. Similarly, the naira depreciated at the Bureaux De Change and parallel market by 1.38 percent (or N3.00) and 1.60 percent (or N3.00) to N220.50/$ and N222/$, respectively. Conversely, CBN’s clearing rate was unchanged at N196.90.
This week, at the money market, treasury bills worth N120.53 billion will be auctioned viz: 91-day bills worth N31.19 billion; 182-day bills worth N39.34 billion, and 364-day bills worth N50 billion. Also, treasury bills worth a total of N134.56 billion will mature, viz – 91-day bills worth N14.04 billion; 182-day bills worth N39.34 billion, and 364-day bills worth N81.19 billion.
Nigerian Interbank Offer Rates (NIBOR) last week advanced across all placement tenors as financial system liquidity tightened. The central bank auctioned treasury bills worth N143.64 billion through the primary market at mixed directional marginal rates – 91-day bills worth N26.30 billion (yield upped to 10% from 9.79%); 182-day bills worth N25 billion (yield unchanged from last auction at 12.70%) and 364-day bills worth N92.64 billion (yield declined to 12.80% from 12.99%).
An additional N79.71 billion in 178-day bill was auctioned via open market operations. The outflow was offset by inflows in matured treasury bills, viz: 91-day bills worth N33.88 billion; 182-day bills worth N51.30 billion, 364-day bills worth N85 billion and another 364-day bills worth N92.34 billion. However, given additional outflows via bonds and foreign exchange auctions, NIBOR advanced across all tenor buckets – NIBOR for overnight funds, 1 month, 3 months and 6 months increased to 34.58 percent (from 13.54%), 15.80 percent (from 15.29%), 16.68 percent (from 16.64%), and 17.69 percent (from 17.67%), respectively
At the fixed income market, Federal Government of Nigeria bonds worth N80.22 billion were auctioned on Wednesday, June 17, and in line with our expectation, marginal rates (MR) trekked northwards amid inflationary trend.
