Naira sustains value increase across foreign exchange markets despite currency scarcity, election jitters



Uba Group

In the just concluded week at the open market, the local currency edged the United States dollar as it appreciated by N6.00 or 0.79 percent week on week to close at N752/USD from N758/USD in the previous week even as dollar demand took calm in the face of scarcity crunch.

Also, at the investors’ and exporters’ FX window, the Naira appreciated slightly 0.05 percent week on week to close at N461.50/USD from N461.75/USD despite the growing FX demand pressure on the naira.

A look at activities at the Interbank Foreign Exchange Forward Contracts market, the spot exchange rate remained unchanged at N462/USD.

Also, in an analysis of the Naira/USD exchange rate in the weekly Naira FX Forward Contracts Markets, it was all green for the Nigerian Naira index across all forward contracts with appreciations reported for the 1-Month, 2-Month, 3-Month, 6-Month and 12-Month tenor contracts against the greenback by +0.11 percent, +0.48 percent, +0.82 percent, +0.63 percent and +0.10 percent week on week to close at contract offer prices of N466.68/USD, N473.97/USD, N482.13/USD, N508.90/USD and N542.79/USD respectively.

In the oil market last week, oil price oscillation signaled positive trade at USD81.24 per barrel on the back of US oil drawdowns and the slow economic recovery in China.

However, on the home front, the Bonny Light crude price react positively to factors playing in the oil market as it plummeted by 5 percent or (USD4.39) week on week, to close at USD83.40 per barrel (09/03) from USD87.79 per barrel last week.

This week, financial analysts expect the naira to trade in a relatively calm band across various market segments in the face of the Naira scarcity and as currency traders and financial institutions await the next action point from the Central Bank of Nigeria.

“This week, financial analysts expect the naira to trade in a relatively calm band across various market segments in the face of the Naira scarcity and as currency traders and financial institutions await the next action point from the Central Bank of Nigeria”

Elsewhere at the money market, in the just concluded week, CBN refinanced maturing T-bills worth N224.50 billion in the primary market as stop rates moved northward for most maturities.

The 91-day saw the highest demand, as implied by a 4.23x bid-to-cover ratio, which led to a fall in its stop rates to 1.40 percent (from 3.00%).

However, the stop rates for 182-day and 365-day bills increased to 6.00% (from 3.24%) and 10.00% (from 9.90%), respectively.

Overall, demand improved from the last auction as the average bid-to-cover ratio rose to 2.79x (from 1.13x) and total sales and subscriptions stood at N324.50 billion and N906.21 billion, respectively.

In the secondary market, NITTY rose for all maturities tracked in tandem with the rising stop rates. Yields for 1-month, 3-month, 6-month, and 12-month tenor buckets rose to 3.58 percent (from 3.13%), 4.16 percent (from 3.68%), 4.96 percent (from 4.60%), and 6.66 percent (from 6.19%), respectively.

In the opinion of financial experts, the Naira demand pressure is expected to stay unabating following the limited supply of the local currency market and the recent ruling from the Supreme Court which renders the old banknotes a legal tender until December 31, 2023.

“However, it is very unlikely for the apex to comment on the court judgment as it has resolved to phase out the old banknotes from the system in the bid to monitor currency in circulation and money supply,” analysts noted.

A financial expert, Okechukwu Unegbu, commended the Supreme Court for legalising the usage of the old Naira along with the new ones.

Unegbu, a past president of the Chartered Institute of Bankers of Nigeria, said that the Naira redesign policy had inflicted avoidable pain on Nigerians. Unegbu, also a lawyer, said that the apex court’s judgement had nullified the actions of the CBN as regards the Naira redesign project.

He urged the CBN to immediately take steps to release the over two trillion Naira of the old currency it had mopped up through the deposit money banks.


“In other words, the currency should revert to what it was before, and every other person, including the President and members of the National Assembly should comply.

“For me, it is a good decision because people have suffered. Many people could not buy food and medicines.

“The apex bank said it had mopped up over N2 trillion of the old currency, they should bring out that money through the banking system so that people can get money to move ahead and do their businesses,” he said.

Unegbu advised the CBN to execute the cashless policy in phases to avoid inflicting such pain on Nigerians, especially the rural dwellers.

“There is no problem with the cashless policy but because of the state of the economy and the level of illiteracy, the CBN s h o u l d have started implementation in phases.

“Cashless policy should start from urban and commercial centres like Lagos, Abuja, Port Harcourt and Kano before moving to the rural communities.

“You cannot make such a blanket decision in the Nigerian system because of the way we are. The shortage of cash is worse in rural communities, where some people have never even sighted the new notes,” Unegbu said.

He urged the CBN to go back to the drawing board and design a more effective and less cumbersome implementation of cashless policy and financial inclusion initiative.

Meanwhile, activities in the OMO space were bearish as OMO bills worth N50 billion were repaid with no refinancing from the apex bank. Given the limited inflow, NIBOR for overnight, 1 month, 3 months, and 6 months rose to 10.80 percent (from 10.50%), 11.80 percent (from 10.80%), 12.60 percent (from 11.65%), and 13.40 percent (from 12.50%), respectively.