Low forex inflow weakens Naira at I&E window

The value of the naira at the Nigeria Autonomus Foreign Exchange (NAFEX) market weakened last week compared to what it closed the previous week as inflow from the window dropped to $796.02 million.

Penultimate week, the NAFEX also termed the Investors’ and Exporters’ Window had seen an inflow $1.292 billion. Although the Central Bank of Nigeria (CBN) had increased its interventions, a low inflow of dollars on Friday at the I&E window saw the naira selling at N361.32 to the dollar as against N361.07 which it sold to the dollar the previous week.

CBN had intervened twice at the foreign exchange market last week boosting inflow from the official and I&E window. In total, both windows saw a combined inflow of $1.324 billion last week compared to $1.2 billion the previous week.

The CBN in its two intervention for the week injected $210 million and $318.73 million into the foreign exchange market on Tuesday and Friday respectively. The Monday intervention of $210 million was meant to cater for requests in the wholesale segment of the forex market.

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The information obtained from the CBN on Friday indicates that the deals in the retail window represent requests from the various sectors in the Secondary Market Intervention Sales (SMIS), thereby providing a boost to the respective sectors.

According to the acting director, corporate communications at the CBN, Isaac Okorafor, $318.73million sold was for companies in the raw materials, agricultural, airline and petroleum industries.

Okorafor reiterated the CBN’s commitment to ensuring that all the sectors continue to enjoy access to the foreign exchange required for their business concerns.

At the bureau de change (BDC) market the currency remained firm by trading at N360/$1, N482/€1, N420/£1 throughout the week which it also maintained last week.

Meanwhile, overnight lending rate at the interbank market surged 1,050 bps on average, w/w, to close at 14.08% as outflows of N207.04 billion through Open Market Operations and N31.22 billion through bond auctions as well as forex sales outweighed inflows from matured OMO bills worth N183.27 billion.

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This week, inflows from maturing OMO bills worth N238.65 billion and the monthly FAAC disbursement are likely to outweigh outflows; thus, higher liquidity.

In the treasury bills market, bearish sentiments were sustained, on the back of reduced liquidity. Consequently, average yield rose 10 bps to 13.00%. Investor sentiment was negative across the short (+8 bps), mid (+8 bps), and long (+12 bps) ends of the curve, amid selloffs of the 13DTM (+61 bps), 146DTM (+29 bps), and 188DTM (+36 bps) bills, respectively.

Analysts say they expect a reversal of the bearish trend, on the back of anticipated healthy liquidity. At the NTB auction scheduled for Wednesday, the CBN will offer NGN170.50 billion – NGN9.52 billion of the 91-day, NGN33.93 billion of the 182-day, and NGN127.06 billion of the 364-day – worth of bills to the market.

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