Naira sheds weight at parallel market as panic buying continues

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BY BAMIDELE FAMOOFO

Uba Group

In the first trading week in September, the Naira traded in a relatively calm manner at the parallel market segment to close the week flat at N700/USD as panic buying continues.

It was a marginally negative close for the local currency at the Investors and Exporters window of the market as panic buying continues to take center stage despite the $265 million FX inflows from the CBN’s vault majorly to airline operators in order to repatriate trapped revenues in Nigeria.

Thus, the naira depreciated by (0.27%) N1.17 week-on-week to N431.50/USD from N430.33/USD in the prior week as FX users and traders continue to experience shortages within the market and forcing traders to reserve their greenback holdings for a future date as the CBN continues ignoring traders while it maintains its intervention in the market.

Most market participants maintained their bids between N417/USD and N437/USD. At the Interbank Foreign Exchange market, NGN/USD closed flat at N430.00/USD amid CBN’s weekly injections of over $200 million where $100 million was allocated to Wholesale Secondary Market Intervention Sales (SMIS), $50 million was allocated to Small and Medium Scale Enterprises and $55 million was sold for Invisibles.

In the meantime, the Naira/USD exchange rate in the Naira FX Forward Contracts Markets inched higher across all tenors, safe for the 12 months contract which closed the week in the opposite direction at N477.74/USD from N478.51/USD.

However, the 1M, 2M, 3M and 6M tenors all rose by 1.26 percent, 1.19 percent, 0.93 percent, and 0.27 percent respectively to close the week’s offering at N434.44/USD, N437.68/USD, N440.19/USD, and N452.58. Elsewhere, the Bonny light crude price depreciated by $7.95 (-7.6%) w/w to close the week at $97.0 per barrel from $104.95 per barrel in the previous week.

Naira closed at N430/$1 on Thursday, 1st September 2022, representing a marginal depreciation of 0.13% compared to N429.44/$1 recorded in the previous trading session. The value of FX supply that exchanged hands on Thursday totaled $74.68 million which is 31.78% lower than $109.47 million traded on Wednesday, 31st August, 2022.

“The naira depreciated by (0.27%) N1.17 week-on-week to N431.50/USD from N430.33/USD in the prior week as FX users and traders continue to experience shortages within the market and forcing traders to reserve their greenback holdings for a future date as the CBN continues ignoring traders while it maintains its intervention in the market”

The exchange rate at the crypto currency peer-to-peer FX exchange likewise depreciated to N697.5/$1 on Friday morning from N693.2/$1 recorded as of the same time on Thursday. This represents a 0.62% fall against the US dollar in the P2P market.

Also, the exchange rate at the parallel market depreciated by 0.43% to close at N700/$1 on Thursday from N697/$1 traded on Wednesday.

In the same vein, Nigeria’s foreign reserve continued its gains on Wednesday, as the reserve gained 0.02% to stand at $39.02 billion. The nation’s foreign reserve had been on a downward trend due to the constant intervention by the Central Bank of Nigeria in the official market to maintain the stability of the local currency.

The exchange rate at the official market closed at N430/$1 to a dollar on Thursday, 1st September 2022, from N429.44/$1 recorded in the previous trading session.

The opening indicative rate closed at N429/$1 on Thursday, 1st September 2022, compared to N429.17/$1 recorded in the previous day.

Furthermore, an exchange rate of N437/$1 was the highest rate recorded during intra-day trading before it settled at N430/$1, while it traded as low as N417/$1 during intra-day trading.

A total of $74.68 million in FX value was traded in the Investors and Exporters window on Thursday, a 31.78% dip from $109.47 million that exchanged hands in the previous day.

This week, the Naira is expected to trade in a relatively calm manner across all segments barring any significant market distortions as the CBN continues its weekly FX market interventions.

Also, the value of FGN bonds traded quietly in the secondary market as investors take a stand off approach to observe maturities with attractive yields.

Just like it was witnessed in the prior week, the 10-year 16.29 percent FGN MAR 2027 bond paper with yields of 13.05 percent (from 12.71%); the 30-year 12.98 percent FGN MAR 2050 instrument with the yield at 13.65 percent (from 13.75%); the 15-year 12.50 percent FGN MAR 2035 bond and the 20- year 16.25 percent FGN MAR 2037 bond with current yields at 13.16 percent and 13.46 percent, respectively all traded flat respectively. Elsewhere, for all maturities tracked in the FGN Eurobond space in the international debt market, the value of FGN Eurobonds traded decreased; the 10-year 6.375 percent JUL 12 2023 bond, the 20-year 7.69 percent FEB 23 2038 paper, and the 30- year 7.62 percent NOV 28 2047 debt instruments each lost $1.38, $4.16, and $4.47 week on week respectively with their corresponding yields rising to 10.94 percent (from 9.10%), 13.35 percent (from 12.48%), and 12.95 percent (from 12.07%).

“CBN"