SAT, MAY. 06 2023-theGBJournal|After two consecutive weeks of decline, Nigeria’s FX reserve increased by US$25.17 million w/w to US$35.28 billion (03 May 2023).
Analysts say the FX liquidity issues will remain over the short-to-medium term as they do not see any positive signal that denotes an improvement in FX supply relative to the pre-pandemic levels.
Moreover, considering the tepid accretion to the reserves given low crude oil production and elevated PMS under-recovery costs, FPIs who have historically supported supply levels in the IEW will be needed to sustain FX liquidity levels in the medium to long-term.
Meanwhile, the naira appreciated by 0.2% to N462.23/USD at the I&E window (IEW), with total turnover at the window (as of 04 May 2023) declining by 36.8% WTD to US$206.79 million, as trades were consummated within the N460.00 – N478.82/US$ band.
In the Forwards market, the naira was flat at the 1-month (N469.74/USD) contract but depreciated across the 3-month (-0.2% to N496.97/USD), 6-month (-2.7% to N540.64/USD) and 1-year (-0.5% to N568.29/USD) contracts.
The overnight (OVN) rate contracted by 175bps w/w to 11.4%, as the system remained buoyant with the liquidity surfeit from last week coupled with this week’s inflow from OMO maturities (N50.00 billion). We highlight that the average system liquidity closed at a net long position of N313.87 billion (vs a net long position of N734.22 billion in the previous week).
We believe the OVN rate will head upwards, as the expected inflow from OMO maturities (N5.00 billion) may not be enough to support the system liquidity.
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