This week there is expectation of increased demand for foreign exchange (forex) at the inter-bank market and bureau de change with attendant pressure on the naira following high cost of accessing forex at the official market, analysts at Cowry Asset Management Limited have said.
The Central Bank of Nigeria (CBN), as part of efforts to dampen demand, last week, reviewed its foreign exchange guideline on Retail Dutch Auction. The new guideline stipulates that banks are to provide funds for their customers’ bid in a special designated account in CBN two days prior to the bid.
This, according to the analysts, is obviously intended to reduce the banks’ ability to fund their customers’ bids, and consequently, reduce the overall bid in the official market. With this policy, the cost of accessing forex at the official market has been inadvertently increased. More forex users are likely to be forced to patronise the alternative markets.
“Consequent upon the above, we presage a moderation in the bid volume at the official market. The inter-bank and BDC markets are however expected to witness increased demand with attendant pressure on the exchange rates”, the analysts said.
Last week, the foreign exchange came under pressure at the alternative markets as demand exceeded supply. However, at its bi-weekly Retail Dutch Auction (RDA), the apex bank offered USD800 million but sold USD799.62 million to end users. Despite the increased supply, the official exchange rate remained stable at N155.75/USD. The local currency weakened in other market segments. At the inter-bank market, the naira depreciated by 0.53% (or N0.86) to N163.31. Also, the naira lost ground at both the bureau de change and parallel market by 0.90% (or N1.50) and 0.30% (or N0.50) to N167.50 and N168.50, respectively.
Also this week, there is expectation of upward pressure on inter-bank rates on the back of anticipated withdrawals by banks for purchase of fixed income instruments and the additional sterilisation of banks’ liquidity through the two days in advance deposit for customers’ forex bids, the analysts said.
However, Treasury Bills worth N167.09 billion will mature on Thursday, February 13, 2014. The maturities will consist of 76-day bills worth N13.67 billion; 210-day bills worth N99.47 billion; 230-day bills worth N53.96 billion.
In the previous week, Treasury Bills worth N370.52 billion matured on Thursday, February 6, 2014. The maturities consisted of 71-day bills worth N45.54 billion; 72-day bills worth N16.80 billion; 91-day bills worth N22.06 billion; 125-day bills worth N17.65 billion; 127-day bills worth N37.21 billion; 132-day bills worth N64.04 billion; 182-day bills worth N50.00 billion; and 364-day bills worth N117.22 billion.
The maturities were partly offset by N289.28 billion in auctioned bills via the primary market as well as open market operations, viz: 98-day bills worth N50.00 billion; 140-day bills worth N50.00 billion; 91-day bills worth N22.06 billion (marginal rate, MR, increased to 11.75% from 10.75%); 182-day bills worth N50.00 billion (MR rose to 12.22% from 11.94%); and 364-day bills worth N117.22 billion (MR upped to 13.34% from 12.22%).
However, due to additional withdrawals to purchase foreign exchange (about N125.79 billion), NIBOR for call, 30 days, 60 days and 90 days increased to 11.92% (from 10.50%), 12.67% (from 11.38%), 12.92% (from 11.75%) and 13.22% (from 12.04%), respectively.
HOPE MOSES-ASHIKE
