Naira stands as robust liquidity keeps money market rates single

Despite the sloppy external reserve movement, Naira remains stable at the foreign exchange market in the past week.

At the official window, the local currency strengthened 5 kobo week on week to close at ₦306.95/US$1.00.

Meanwhile, at the parallel market, Naira traded flat all week at ₦360.00/US$1.00. Conversely, Naira depreciated 40 kobo week on week to ₦364.97/US$1.00 at the investors and exporters (I&E) window.

In addition, activity level at the I&E Window surged 118.5% as total turnover for the week advanced from US$966.2 million to US$2.1 billion.

In the week, the total value of open futures rose by 2.9% from US$286.million to $10.1 billion, driven by additional subscription of US$116.5 million for the DEC 2020 instrument at contract price of ₦365.1.

This put its total value at US$988.5 million at the end of the week.

“Conversely, the MAY 2020 instrument with contract price of ₦362.93 had the least buy interest, increasing by US$0.6 million week on week to US$1.4 billion”, analysts at Afrinvest stated.

Analysts said in the coming week, it expects the Naira to remain relatively stable across FX Windows.

In the money market, robust liquidity keeps rates within single digit. The open buy back (OBB) and overnight rate (OVN) opened the week at 16.5% and 17.8% respectively.

This is higher than 14.0% and 15.3% recorded in the previous week as system liquidity fell from ₦510.8 billion to ₦112.1 billion.

Analysts at Afrinvest revealed that on Wednesday, the OBB and OVN rate fell to 14.3% and 15.3% respectively from 14.5% and 15.3% (on Tuesday.

It further slumped on Thursday to 6.2% and 7.5% as system liquidity rose to ₦406.4 billion due to OMO maturities.

On Friday, OBB and OVN rate declined to close the week at 5.5% and 6.3% respectively, as system liquidity settled at ₦386.4 billion.

Meanwhile, following the inflow from OMO maturities worth ₦338.5 billion on Thursday, the Central Bank of Nigeria conducted OMO auction worth ₦150.0 billion to keep system liquidity in check.

Similar to last previous week, there was no sale for the short-term instrument (82-day instrument) while the 362-day (Offer: ₦130.0 billion; Subscription: ₦107.8 billion; Sale: ₦107.8 billion) instrument was undersubscribed at 0.8x with a marginal rate of 13.05%.

Conversely, the 180-day (Offer: ₦10.0 billion; Subscription: ₦20.4 billion; Sale: ₦20.4 billion) instrument was oversubscribed at 2.0x while maintaining marginal rate of 11.60%.

In the secondary treasury bills market, performance was bullish as average yield across benchmark tenors trended lower, down 19bps w/w to close at 3.6%.

During the week, average yields across instruments were relatively flat with most local investors uninterested.

The 91-day instrument enjoyed the most buy interest as yields declined 76bps to 2.6% while the 182- and 364-day instruments rose 3bps and 16bps to 3.7% and 4.3% respectively.

“In the coming week, we expect money market rates to remain within the single digit band as OMO maturity worth ₦440.9 billion is expected to flow into the system.”, Afrinvest projected.

Naira stands as robust liquidity keeps money market rates single By Sam Atanbiyi

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