Naira outlook remains stable as external reserves hit 48-month high of $41.5bn

In line with the trend, the CBN continued its weekly FX interventions last week, injecting $100.0 million on Monday via wholesale SMIS intervention.

A total of $55.0 million was auctioned at the Small and Medium Enterprises (SMEs) segment while $55.0 million was sold to satisfy retail invisible demand (Tuition fee, medical payments, and BTA).

Thus, FX rates traded within a tight band at all segments of the market with the CBN official spot rate trading flat all week after an initial 5 kobo depreciation on Monday (to N305.90/$1.00).

Similarly, at the parallel market, rate opened at similar levels from the prior Friday (N363.00/$1.00) and traded flat all week.

At the Investors & Exporters’ (I&E) window, the NAFEX rate shed 49 kobo in the first two trading sessions to close at N360.58/$1.00 on Tuesday from N360.09/$1.00 the previous Friday.

The losses were fully recouped in Wednesday’s trading session as the Naira strengthened 54kobo to settle at N360.03/$1.00 but slightly pared gains on Thursday, shedding 7kobo before settling at N360.00/$1.00 on Friday, translating to a 1kobo W-o-W depreciation.

Similarly, activity level weakened at the Window relative to previous week as cumulative weekly turnover as of Thursday ($608.9 million) was 15.0 percent weaker than US$716.6 million recorded in the same period the prior week.

At the FMDQ OTC futures market, the total value of open contracts of the Naira settled OTC futures closed the week at $3.3 billion, $10.5 million higher than $3.3 billion the prior week.

The DEC-2018 instrument (contract price: N362.84) received the most buying interest in the week with an additional subscription of $10.0m, which took total value to $189.63. The NGUS APR2018 (contract price: 360.92) however remains the most subscribed with a total value of $657.9 million while the NGUS JAN-2019 instrument (contract price: N362.27) is the least subscribed with total value of US$10.0 million.

Following a successful Eurobond issuance by the Federal Government last week in which $2.5 billion was raised to refinance maturing short-term local debt securities, analysts at Afrinvest expect further accretion to external reserves (currently at a 48-month high of US$41.5 billion) with positive feedback on the CBN’s ability to sustain FX intervention sales. Hence, despite downside risks of volatility in the oil market and political uncertainty, we retain our near-term positive outlook on FX market stability and liquidity