Naira diminishes as turnover increases in forex market



… Expense of funds pattern low.

By Babajide Komolafe & Elizabeth Adegbesan.

THE volume of dollars traded (turnover) in the Financiers and Exporters (I&E) window of the forex market grew by 26 percent, month-on-month, to $5.3 billion in November from $4.2 billion in October,2019

This represents the very first month-to-month boost in the month-to-month turnover because August.

Turnover in the window increased by 75 percent to $7 billion in August, thanks to increased inflow from foreign portfolio financiers (FPIs). Regular monthly turnover, nevertheless, stopped by 44 percent to $4.4 billion in September, from where it even more was up to $4.2 billion in October, prior to increasing by 26 percent to $5.3 billion in November.

Financial Lead analysis of weekly turnover in the window revealed that $11288 million was sold the very first week of November, while $1.4 billion was sold the 2nd week. In the 3rd week, turnover increased 14 percent to $1.6 billion however fell by 25 percent to $1.2 billion in the 4th week and down once again by 17 percent to $99168 million in the 5th week of November.

Nevertheless, the naira diminished by 6 kobo in November as the a sign currency exchange rate of the window increased to N36281 per dollar on November 29 from N36275 per dollar on November 1. Experts, nevertheless, anticipate the naira to stay steady at present levels in the numerous section of the forex market due to ongoing intervention by the CBN.

Expense of funds to stay low.

Expense of funds will stay low in the interbank cash market today due to inflow of N344 billion from developing treasury expenses which would worsen the excess liquidity circumstance in the market.

Recently, expense of funds stayed steady following the inflow of N5033 billion from grown secondary market (Free market Operation, OMO) treasury expenses. The inflow went beyond the outflow of N432 billion consisting of N15062 billion through Nigeria Treasury Costs (NTB) auction and N28145 billion OMO expenses auction carried out by the Reserve bank of Nigeria (CBN) throughout the week.

As a result, typical short-term interbank rate of interest stayed nearly the same, increasing partially by 13 basis points (bpts).

Information from FMDQ revealed that rate of interest on Collateralised (Open Redeem, OBB) loaning increased partially by 8 bpts, to 3.79 percent recently from 3.71 percent the previous week. Likewise, rate of interest on Over night loaning increased partially by 17 bpts to 4.5 percent recently from 4.43 percent the previous week.

Experts anticipate this pattern to continue today, as the inflow of N344 billion from developing OMO expenses buoys market liquidity.

Experts at Lagos based Cowry Property Management Business, in their forecast for the week stated: “In the brand-new week, we anticipate stability in interbank loaning rates in anticipation of inflows worth N34488 billion in grown OMO expenses.”.

Likewise, experts at Lagos based Afrinvest Securities Limited stated: “In the coming week, we anticipate the CBN to sustain its OMO auction considered that maturities worth N3449 billion will strike the system. Likewise, we imagine the raised system liquidity levels would continue to drive rates lower in the secondary T-Bills market.”.

Bonds rates to preserve upward pattern.

On the other hand, rates of FGN bonds in the Over-the Counter (OTC) section are anticipated to preserve their upward pattern, thanks to increased need occasioned by the exemption of regional financiers from OMO expenses auction.

According to Afrinvest experts, efficiency in the domestic bond market recently was bullish due to increased need throughout maturities and as a result, typical bond yield decreased 23 bps Week-on-Week (WoW) to 12 percent. Yield decreased throughout the curve, with the brief end taking pleasure in the most buying interest, down by 204 bps.

” We anticipate increased need to advance the back of the limitation of regional financiers from the OMO market”, they stated.

Likewise, experts at Cowry Assets stated: “We anticipate FGN bond rates to increase (with matching fall in yields) at the OTC market amidst awaited increase in monetary system liquidity.”.