SAT, SEPT 23 2023-theGBJournal |This week, Nigeria’s FX reserve closed flat at US$33.28 billion (21 September).
At the I&E window (IEW), the naira appreciated by 1.2% to N747.76/US$, with total turnover at the window (as of 21 September) advancing by 52.3% WTD to US$418.61 million, as trades were consummated within the N475.00 – N910.00/USD band.
In the Forwards market, the naira rates increased across the 1-month (+2.0% to N781.96/USD), 3-month (+2.9% to N795.39/US$), 6-month (+4.4% to N814.91/US$) and 1-year (+5.8% to N867.80/US$) contracts.
The narratives in the FX market have remained the same in recent weeks, as FX reform momentum has slowed down.
Hence, barring any significant positive developments, we expect the lingering low crude oil production and a sustained dip in foreign investors’ net flows to weigh on FX supply in the short term.
Consequently, we expect FX liquidity constraints to linger in the near term, ensuring the local currency pressures remain intact.
Meanwhile, at money market, the overnight (OVN) rate declined significantly by 21.12ppts w/w to 3.3% as inflows from government SURE-P refunds (c.N300.00 billion) and FGN bond coupon payments (N134.70 billion) saturated the system and supported the financial system liquidity.
As a result, the average system liquidity closed at a net long position of N109.42 billion (vs. a net short position of N273.74 billion from the previous week).
We expect the OVN rate to remain depressed next week as we believe the expected inflows from FGN bond coupon payments (NGN202.34 billion) will likely keep the system afloat.
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