FX: Naira Depreciates Against USD at IEW, Parallel Market

FX: Naira Depreciates Against USD at IEW, Parallel Market

The Nigerian local currency, Naira, depreciated against the United States dollar amidst social political unrest that engulfed the nation in the past weeks. Cowry Asset Management Limited however said in a note that FX plunged comes in line with its expectations.

In the foreign exchange market, Naira plunged at the Investors and Exporters window as well as in the parallel market by 0.04% and 0.22% respectively.FX: Naira Depreciates Against USD at IEW, Parallel Market

The local currency close at ₦386/USD and ₦463/USD respectively amid the disruptions in economic activities, particularly in Lagos State.

However, analysts said the exchange rate remained unchanged at the Bureau De Change at ₦457/USD. Similarly, the exchange rate closed flat at ₦381/USD at the Interbank Foreign Exchange market amid weekly injections of USD210 million by CBN.

The apex bank intervened in the forex market as USD100 million was allocated to Wholesale Secondary Market Intervention Sales (SMIS), USD55 million was allocated to Small and Medium Scale Enterprises and USD55 million was sold for Invisibles.

Elsewhere, the exchange rate appreciated for most of the foreign exchange forward contracts. This includes 1 month, 2 months, 3 months, 6 months and 12 months rates which rose by 0.01%, 0.07%, 0.15%, 0.56% and 1.21% respectively to close at ₦386.49/USD, ₦387.03/USD, ₦387.61/USD, ₦389.09/USD and ₦395.39/USD respectively.

However, Cowry Asset said spot rate closed flat at ₦381.00/USD. In the new week, the firm said it expects Naira to depreciate in most market segments in the wake of the disruptions to economic activities during the just concluded week.

Meanwhile, the Federal Government of Nigeria (FGN) bond top rates slide on sustained buy pressure.

The Debt Management Office sold FGN bonds worth ₦45.00 billion at the primary market auction broken down into 15-year, 12.50% FGN MAR 2035 paper worth ₦20.00 billion and 25-year, 9.80% FGN JUL 2045 bond worth ₦25.00 billion respectively.

Analysts at Cowry Asset said given the limited number of bonds auctioned, stop rates fell for all maturities amid relatively high demand. The stop rate for 15-year and 25-year bonds fell to 4.97% (from 8.52%) and 6.00% (from 8.90%) respectively.

However, analysts said values of FGN bonds traded at the over-the-counter (OTC) segment further appreciated for all maturities tracked amid the crash in stop rates.

The 5-year, 14.50% FGN JUL 2021 bond, the 7-year, 13.53% FGN MAR 2025 note, the 10-year, 16.29% FGN MAR 2027 debt, and the 20-year, 16.25% FGN APR 2037 paper gained ₦0.35, ₦2.58, ₦10.88 and ₦23.49 respectively.

Their corresponding yields fell to 0.80% (from 1.55%), 3.26% (from 3.81%), 3.34% (from 4.76%) and 5.04% (from 6.31%) respectively.

Also, Cowry Asset said the value of FGN Eurobonds traded at the international capital market depreciated for all maturities tracked on sustained bearish activity.

The 10-year, 6.75% JAN 28, 2021 bond, the 20-year, 7.69% FEB 23, 2038 paper and the 30-year, 7.62% NOV 28, 2047 debt lost USD0.23, USD2.09 and USD1.83 respectively; while their corresponding yields rose to 4.47% (from 3.79%), 8.64% (from 8.39%) and 8.50% (from 8.32%) respectively.

In the new week, Cowry Asset expects local OTC bond prices to appreciate (and yields to moderate), as prices in the secondary market continue to track those in the primary market. Read Also: Nigeria’s 20-Year Eurobond Yield Rises to 8.96%

“We also expect increased demand for Eurobonds as yields trade in line with similar maturities with local bonds”, analysts stated.

Read Also: Banks’ Provisions for Retail FX Auction Could Pressure Funding Rates

FX: Naira Depreciates against USD at IEW, Parallel Market