The naira is expected to stabilise at the autonomous market this week as the Central Bank of Nigeria (CBN) admits back the Bureau De Change (BDCs) that were denied forex (FX) allocation last week, according to analysts at Cowry Asset Management Limited.
The CBN last week denied 1,599 out of 2,818 BDC operators access to FX sales on Wednesday, due to failure to file documentation on previous dollar purchases.
Naira last week weakened further with respect to the dollar on sustained dollar shortages amid week-on-week 0.84 percent decline in external reserves to $29.8 billion. The local currency lost 1.67 percent to the greenback to close at N244/$ from N240/$ in the preceding week at the BDC market segment.
Similarly, the naira lost 1.65 percent of its value relative to the dollar at the parallel market segment to close at N246/$ from N242/$ in the previous week.
However, CBN clearing rate and interbank rate closed steady at N197/$ and N199.07/$, respectively. The depreciation in the BDC and parallel market segments could be attributed to the decision of CBN to lockout several BDCs for the week’s bid due to alleged late rendition of their weekly returns.
Meanwhile, most forward contracts at the OTC market continued to indicate relative stability of the naira with respect to the dollar. The spot rate, 1 month, 3 month, 6 month and 12 month forwards were put at N198.87/$ (from N199.04/$), N201.59 (from N201.60/$ in the preceding week), N208.58/$ (from N208.62/$), N216.83/$ (from N216.91/$) and N228.62/$ (from N228.81/$), respectively.
At the fixed income market, the analysts expect a rebound in bond prices with corresponding decrease in yields as expected boost in liquidity triggers renewed bargain-hunting activities.
yields on FGN bonds at the OTC market rallied as investors sold off to locked in profit. The 20-year, 10.00 percent FGN Jul 2030 paper depreciated by N3.18 (yield advanced to 11.49%); 10-year, 16.39 percent FGN JAN 2022 bond lost N3.29 (yield rose to 11.34%); the 7-year, 16.00 percent FGN JUN 2019 debt declined by 1.41 percent (yield upped to 10.67%); the 5-year 15.10 percent FGN APR 2017 slid by N1.18 (yield increased to 7.25%); while the 3-year, 13.05 percent FGN AUG 2016 bond instrument fell by N1.68 (yield climbed to 4.89%). At the international bond market, FGN Eurobonds declined across board amid week-on-week decrease in the price of crude oil – OPEC’s reference basket price for crude oil declined by 3.05 percent to USD37.89. The 10-year, 6.75 percent FGN JAN 2021 paper lost USD2.27 (yield rose to 7.52%) while the 5-year, 5.13 percent FGN JUL 2018 bond declined by USD1.08 (yield advanced to 6.07%). Similarly, the 10-year, 6.38% FGN JUL 2023 bond pulled back by USD3.09 (yield jumped to 7.85%).
Hope Moses-Ashike
