Nigeria’s FX reserves dips further to $40.72bn, lowest in 32 months
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In yet another worrisome report, Nigeria’s foreign exchange (FX) reserve for the week ended October 25, 2019, weakened further by $23.20 million week to date (WTD) to close at $40.72 billion, ranking as the lowest since the past 32 months.
However, the Central Bank of Nigeria (CBN) sustained its weekly foreign Exchange (FX) intervention, as it sold a total of $210.00 million across the different segments of the FX market during the week.
The $210 million was sold by the apex bank in the proportion of $100.00 million to the Wholesale segment, $55.00 million to the SMEs segment, and $55.00 million to the Invisibles segment respectively.
Consequently, the naira appreciated by 0.03 percent week on week (w/w) to N362.11/USD at the Investment and Export (I&E) window, but closed flat at N360.00/USD at the parallel market.
Elsewhere, total turnover at the I&E window declined by 31.0 percent WTD to USD513.96 million, with trades executed within the N360.00 – 363.00/USD band. In the Forwards market, the naira weakened across all contracts. The 1-month contract weakened by 0.1 percent to N365.36/USD, the 3-month contract depressed by 0.1 percent to N371.86/USD, 6-month contract by -0.3 percent to N382.31/USD and 1-year contract by -0.4 percent to N408.77/USD.
Despite the continued depletion of reserves amidst sell-offs by off-shore investors, Cordros research pointed that its estimate suggests no naira devaluation is feasible in 2019, “as we expect CBN’s sustained intervention to keep the naira to remain resilient in the short to medium-term”
Meanwhile, trading in the Treasury bonds secondary market in the week under consideration was bullish driven by market players’ commitment to reinvest proceeds from the OCT-2019 bonds which matured on Wednesday, October 23, 2019, as well as to cover lost bids from the primary market auction (PMA) which was oversubscribed.
Consequently, the average yield across instruments pared by 10 bps to settle at 14.0 percent. Buying interest was concentrated at opposite ends of the curve, with the JUL-2021 instrument dipping by 54 bps and APR-2049 by -26 bps respectively, recording the largest yield declines.
At the PMA during the week, the Debt Management Office (DMO) allotted a total of N139.81 billion plus an additional N3.00 billion in non-competitive allotments, in bonds to investors.
Demand for the instruments was strong (bid-to-cover: 1.85x), following the bond maturity, and was largely skewed towards the 10-year offering (bid-to-cover: 2.40x). As a result, stop rates declined by 19bps on average, compared to the previous auction, across the three offered tenors.
Experts were of the consensus that, recent developments in the Treasury bills space will provide active trading at the bond market as investors’ look for alternatives. Additionally, market players will look to invest an expected N59.12 billion in coupon payments, and in effect, yields are expected to trend downwards.
Credit: Bonny Amadi