Naira, which traded N251 against the dollar in the morning on Wednesday, later closed at N250/$, same as on Tuesday at the parallel market, after the Central Bank of Nigeria (CBN) cut dollar supply to Bureau De Change (BDC) operators as a result of incomplete documentation.
The CBN yesterday sold $30.5 million to 1,017 BDC, this is 983 short of the over 2,000 operators earlier expected to get dollar supply.
Consequently, the naira closed stable at N248 against the dollar at the BDC segment of the foreign exchange (FX) market.
At the inter-bank market, it strengthened against the greenback by N0.69k or 0.35 percent to close at N198.01k/$ compared with N198.70/$ the previous day, according to data from FMDQ.
Aminu Gwadabe, acting president, Association of Bureau De Change Operators of Nigeria (ABCON), had noted that the CBN had cleared a lot of BDCs after submitting their returns.
He also said on Monday that the CBN had given the BDCs extended deadline for submission of returns from 12 noon to about 4pm, and had also given them the option of using manual if there was a challenge in using rendition.
At the fixed income market, the Debt Management Office plans to raise N50 billion ($254m) on December 9, 2015, via two offerings: The re-opening of a 5-year maturity (15.54% FGN FEB 2020) and a 10-year bond (14.20% FGN MAR 2024). The authorities have re-opened the 5-year maturity in the last three months in order to enhance liquidity and deepen the bond market.
According to analysts at Ecobank Nigeria, investors’ confidence in the long end of the curve appears to have weakened based on recent primary market auctions results, reflecting foreign investor’s risk-off sentiments and higher inflation expectations.
However, the authorities seem committed to the issuance of long tenured bonds, leveraging on the long-term positive outlook of the economy. The unique selling point is the long-term positive outlook that foresees a long-term drop in the inflation rate and a switch to monetary policy easing cycle, which will help crash the money market rates and re-direct credit to private sector and reduced cost borrowing to the government.
Market performance is partly driven by inter-bank liquidity amid monetary policy expectation. Yields have moderated between 200 to 300bps month-to-date in the secondary market ever since CBN’s MPC decision of November 24, 2015.
Assuming there are no significant changes to the monetary policy expectation, in terms of easing outlook and budgetary expectations in 2016, interest rates will continue to re-align amid monetary policy expectation, the analysts said.
