The foreign exchange market closed the week with Naira weakening by 0.42 percent after exchanging with the dollar at N477 compared to N475 closed for the previous week on the parallel market.
The foreign exchange market has been under pressure since March 2020 following a sharp drop in oil prices as a result of the Covid-19 pandemic.
However, turnover spiked by 6.8% at the Investors & Exporters (I&E) forex window to a weekly average of USD172.0 million from USD161.4 million in the prior week. Nevertheless, the Naira remained flat in the I&E forex window to close at N394.0/USD.
Within the week, precisely on Friday, the Central Bank of Nigeria (CBN) directed banks to close all Naira accounts for the International Money Transfer Operation (IMTOs).
The move was to ensure that diaspora remittances are received by beneficiaries in foreign currency only (cash and/or transfers to domiciliary accounts of recipients).
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The circular to Deposit Money Banks (DMBs), IMTOs and Payment Service Providers (PSPs) on ‘Receipt of Diaspora Remittances: Additional Operational Guidelines 2,’ was jointly signed by the director of banking supervision and director of payments system management.
On Wednesday, the apex bank had directed the switches and processors to immediately halt all domestic currency transfers in respect of foreign remittances through IMTOs.
However, the CBN allowed banks to open new Opex accounts for the purpose of the IMTO operations, such as salary payments and other operating expenses excluding diaspora remittance receipts.
The CBN said in the circular that banks must ensure that proper audit of IMTO accounts is done to forestall further use of naira accounts for diaspora remittances purposes.
Naira remained unchanged at N475 day-on-day on Friday at the Bureau De Change (BDC) segment of the foreign exchange market.
Foreign exchange cash sales to BDCs by the CBN amounted to US$0.33 billion in the third quarter of 2020, according to the CBN economic report.
At the money market, a report by Greenwich Merchant Bank research noted that the Open Market Operation (OMO) bills market closed bearish following sell-offs at the medium to the long end of the curve while major bids at the short end of the curve could not offset the pessimism. Consequently, the average yield at the OMO-bills market soared for the week to 0.5% from 0.4%.
In its scheduled Primary Market Auction (PMA), the CBN rolled over maturing NT-bills worth N7.0bn across the 91DTM at 0.0480% (prev. 0.0100%), 182DTM at 0.5000% (prev. 0.0600%) and 364DTM at 0.1390% (prev. 0.3200%) for the 364DTM. The average bid-to-cover ratio for the auction stood at 17.4x as investors scurried for the sparse bills offered in light of the prevailing robust liquidity witnessed in the market.
The Nigerian treasury bills secondary market closed on a positive note on Friday with average yield across the curve declining by 3 bps to close at 0.40 percent from 0.43 percent on the previous day. Average yields across short-term, medium-term, and long-term maturities compressed by 2 bps, 10 bps, and 1 basis point, respectively.
The highest yield increase was witnessed in the 31-Dec-20 maturity bill, which rose by 1 basis point, while the highest yield decline was seen in the 10-Jun-21 maturity bill, which fell by 13 bps, according to a report by FSDH research.
The Debt Management Office (DMO) in its final PMA for the year sold bonds worth NGN30.0bn of NGN60.0bn offered across the 12.50% FGN MAR 2035 and the 9.80% FGN JUL 2045 papers. Bid range in the PMA widened as investors sought more yields, consequently, the DMO sold the 12.50% FGN MAR 2035 and the 9.80% FGN JUL 2045 papers at 6.95% (prev. 5.00%) and 7.00% (prev. 5.79%) respectively.
“We expect the uncertainty hovering around forward rates to continue to fuel bearish sentiments in the market as market players seek clarity going into the new year,” analysts at Greenwich Merchant Bank said.
