Naira loses strength across FX markets as CBN begins N65 rebate to exporters

BY CHARLES ABUEDE

FX Market: Starting off with the FX currency market, a lot has happened in the space in the past weeks with banks now charging customers above N500 for a dollar spent through the use of their Naira debit cards as these banks peg monthly spending limit at $20 as a result of regulatory rationing.

However, the Nigerian naira lost strength against the dollar last week ahead of the Easter celebrations as a result of scarcity buoyed by high FX demand pressures in the market. Thus, the naira depreciated by N2 to N590 at the parallel markets with another level of resistance witnessed in the market.

Elsewhere, it depreciated by 0.20 percent at the Investors’ and Exporters’ window as the dollar was quoted at N417.50 as against the last close of N416.67 as the Central Bank of Nigeria began the implementation of the N65 FX rebates for exporters selling through the official window.

Meanwhile, most market participants maintained bids at between N410 and N444 per dollar. Currency analysts say they expect the naira to remain largely stable across the various windows of the currency space as the CBN maintains interventions in the FX market.

Money Market: In the money market, FSDH Capital analysts reported that the Overnight (O/N) rate increased by 5.42 percent to close at 11.17 percent as against the last close of 5.75 percent, and the Open Repo (OPR) rate increased by 5.58 percent to close at 10.83 percent compared to 5.25 percent on the previous close.

Fixed Income and Money Trade

Driving into the fixed income market from activities of last week, the market remained largely bearish, with pockets of buy-side activity seen on select days. In the bond market, there were sell-offs which dominated the benchmark curve and as a result, the average yield rose five basis points.

Meanwhile, trading in the Nigerian Treasury Bills market was tepid throughout the week, despite the PMA that was held on Wednesday by the Central Bank.

Expectations: This week, Vetiva Capital and FSDH Capital analysts say they expect the bonds market to trade in a similar pattern as last week, due to a lack of catalysts to sway activity.

Meanwhile, in the Nigerian Treasury Bills segment, bearish trading is anticipated as investors react to the rate hike on the one-year paper.

Nigerian Treasury Bills

The Nigerian Treasury Bills secondary market closed the week on Thursday on a flat note with the average yield across the curve remaining unchanged at 3.35 percent. Also, the average yields across short-term, medium-term, and long-term maturities remained unchanged at 2.69 percent, 3.05 percent, and 3.91 percent, respectively.

Moreover, the CBN held its scheduled Primary Market Auction (PMA) last Wednesday selling Nigerian Treasury Bills worth N159.03 billion across the 91-day (N4.51 billion), 182-day (N10.55 billion), and 364-day (N143.97 billion) tenors.

As reported by analysts at FSDH Capital, the stop rate for 91-day tenor settled lower at 1.74 percent (-1 basis point), while the stop rate for 364-day tenor settled higher at 4.60 percent (+15 bps). However, the stop rate for 182-day tenor remained unchanged at three percent. The auction was oversubscribed by 84 percent, with bid-to-cover ratios settling at 5.43x (91-day), 3.01x (182-day), and 1.72x (364-day).

In the OMO bills market, the average yield across the curve closed flat at 3.56 percent while the average yields across the short-term, medium-term, and long-term maturities remained unchanged at 3.01 percent, 3.36 percent, and 4.50 percent, respectively.

FGN Bonds Market

Meanwhile, with the expectation that the secondary bond market is likely to remain subdued in the short term, the FGN bonds market closed on a mildly positive note on Thursday as the average bond yield across the curve cleared lower by one basis point to close at 11.02 percent from 11.03 percent on the previous session. But the average yields across the short tenor and long tenor of the curve declined by one basis point each, while the average yield across the medium tenor of the curve increased by one basis point.

At the close of the week, the 18-JUL-2034 maturity bond was the best performer with a decrease in the yield of 12 basis points, while the 22-JAN-2026 maturity bond was the worst performer with an increase in the yield of seven basis points.