Naira: CBN Injects over $200m into FX Market – Analysts Note
The Nigerian naira has been trading relatively strong versus the dollar amidst broader pressures on the greenback, with the current value of the U.S. Dollar Index settling at 97.640.
In a commentary note, analysts at CSL Stockbrokers acknowledged that the local currency strengthened to 7 months high on the Central Bank of Nigeria (CBN) support in addition to offshore inflows.
“The Naira has sustained a strong run in recent weeks, appreciating steadily from ₦1,532/US$ at the end of August to around ₦1,500/US$, its strongest level in more than seven months.
“We attribute this performance to consistent interventions by the CBN and sustained inflows from foreign portfolio investors (FPIs) into both the equity and fixed income markets,” the firm said.
According to CSL Stockbrokers, over the past two weeks, the CBN has injected over US$200 million into the foreign exchange market, boosting liquidity and anchoring investor sentiment.
In the same period, the monetary authority conducted two Open Market Operations (OMO) auctions, absorbing roughly ₦1.5 trillion or about US$1.0 billion from the financial system.
“It is worth highlighting that the OMO market continues to stand out as a key attraction for offshore investors seeking compelling carry trade opportunities, given the significantly higher yields on offer compared to treasury bills.
“For instance, the most recently issued 83- day OMO bill cleared at a yield level equivalent to 28%, much higher than the 16% for the 91- day Treasury bill.
“This yield premium highlights the CBN’s strategy of using OMO issuances to attract and retain foreign participation, tighten domestic liquidity, and support the Naira”, the investment firm said.
In the parallel market, the Naira has also firmed, trading around ₦1,520/US$ compared with about ₦1,535/US$ a few weeks ago.
This improvement reflects reduced speculative activity and the positive impact of market reforms that have improved foreign currency availability, particularly in the retail segment. Analysts said.
It recalled that commercial banks have resumed the use of naira cards for foreign transactions.Analysts expect the recent appreciation of the naira to ease import-related cost pressures, which could in turn help moderate headline inflation in the short term.
CSL anticipates that capital inflows are likely to remain strong, especially if the anticipated US Federal Reserve rate cut materialises, which would boost investor appetite for Naira assets and further support the currency.#CBN Injects over $200 Million into FX Market – Analysts Note Zenith Bank Investors Are Taking Positions on Expectations
