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There is expectation this week of further pressure on the naira at the alternative markets due to shift in demand from the official to
the alternative forex markets and declining external reserve, analysts at Cowry Asset Management Limited have said.
External reserves as at February 13, 2014 stood at $41.9 billion from $40.009 billion the previous day.
In line with analysts’ expectation, the naira depreciated against the dollar at most alternative market segments. Central Bank of Nigeria (CBN) offered a total of USD800 million but sold a total of USD596.72 million to end users at its biweekly Retail Dutch Auction (RDAS). The amount sold was 25.38% less than sales in the preceding week.
This may be as a result of the stringent conditions of two days advance funding for forex bids at the RDAS.
Nevertheless, the naira/ USD exchange rate held steady at the official window at N155.75. At the bureau de change, the naira depreciated by 1.19% (or N2.00) to N170.50. However, following intervention by the apex bank, the naira strengthened by 0.60% (or N0.97) to N162.33 at the inter-bank market.
Also this week, interbank rates are expected to moderate following Federation Account Allocation Committee (FAAC) funds worth N629.12 billion which is expected to hit the system during the week.
Additionally, treasury bills worth N343.95 billion will mature February 20, 2014, which would lead to a boost in system liquidity.
The maturities will consist of 28-day bills worth N32.78 billion; 84-day bills worth N22.96 billion; 91-day bills worth N20.65 billion; 182-
day bills worth N30.00 billion; 224-day bills worth N102.87 billion; 226-day bills worth N54.89 billion; and 364-day bills worth N80 billion.
The inter-bank market witnessed upward pressure on interest rates amid reduced financial system liquidity. Treasury bills worth N167.09 billion viz 76-day bills worth N13.67 billion; 210-day bills worth N99.47 billion; 230-day bills worth N53.96 billion matured on Thursday 13, February 2014. The inflows from these maturities were partly offset by outflows worth N156.26 billion in sold bills.
The bills consisted of 147-day bills worth N50.00 billion; 134-day bills worth N6.26 billion; 135-day bills worth N50.00 billion; and 136- day bills worth N50.00 billion. The OMO sales, coupled with funding of forex and fixed income purchases, resulted in net outflow and consequent weekly increase in interbank rates: NIBOR for call, 30 days, 60 days and 90 days increased to 13.71% (from 10.83%), 14.13%
(from 11.58%), 14.42% (from 11.92%) and 14.67% (from 12.17%), respectively.
