The naira is expected to maintain its stability this week following foreign portfolio investors’ inflow and improving external reserves, analysts at Cowry Asset Management Limited have said.
External reserves rose by 0.2 percent to $38.13 billion as at July 10, 2014 from $38.06 billion as at July 8, 2014.
Also, N100 billion ($615.8 million) which the Debt Management Office (DMO) will raise in three local currency debt issues on Wednesday, July 16, 2014 will attract inflows from foreign investors.
Last week, the naira/USD exchange rate remained relatively stable at the official market and the bureaux de change (BDC) in line with analysts’ expectations.
The Central Bank of Nigeria (CBN) sold USD621.91 milion (or N96.85 billion) to end users at its bi-weekly Retail Dutch Auction (RDAS), slightly higher than USD604.58 million (or N94.15 billion) sold the preceding week. Hence the official USD/naira rate closed steady at N155.73/$1.
Similarly, forex rate was steady at the bureau de change at N166/$1. At the inter-bank market, the naira appreciated by 0.08% (or N0.12); however, the local currency weakened at the parallel (or ‘black’) market by 0.30% (or N0.50) to N162.40/$1.
In line with analysts’ expectations, the central bank extended the deadline for compliance with the new licensing requirements of BDCs to July 31, 2014. Also, the apex bank announced that interest will be paid on the mandatory cautionary deposit of N35 million based on banking industry’s prevailing saving accounts rate.
Inter-bank rates at the money market are expected to increase this week as financial system liquidity wanes against the backdrop of bi-weekly RDAS as well as sales of fixed income instruments. The system liquidity is, however, expected to be boosted by Friday from FAAC inflows.
Last week, Nigerian Inter-Bank Offered Rates (NIBOR) moved heterogeneously amongst the placement tenors as financial system liquidity was relatively thin amid participation by lenders in both forex and fixed income auctions. The apex bank, last week, auctioned treasury bills worth N70.56 billion via the primary market, viz: 91-day bills worth N20.16 billion, and 182-day bills worth N50.40 billion. The auctioned bills were counteracted by maturing bills worth equivalent amount and tenors. Further pressure on liquidity, however, came from forex demand on behalf of end users.
