SAT. 26 NOV, 2022-theGBJournal| This week, Nigeria’s FX reserves declined by US$10.97 million w/w to US$37.18 billion (24 Nov), the lowest level since 30 Sep 2021 (USD36.78 billion).
The naira depreciated at the I&E window (IEW) by 0.1% to N446.33/US$. At the parallel market, operators buy rate was quoted mostly around N765/US$ and sold at N770/USD after starting the week at around N780/US$, according to theGBJournal findings.
Operators say they are witnessing some semblance of ”sanity’ in the market but are still not certain what is influencing the stability.
At the IEW, total turnover (as of 24 Nov 2022) declined by 7.1% WTD to US$ 422.66 million, with trades consummated within the N431.00 – NGN463.05/US$ band.
In the Forwards market, the naira depreciated at the 1-month (-0.5% to N451.47/US$) and 3-month (-0.3% to N458.71/US$) contracts.
The naira appreciated at the 6-month (+0.2% to N476.24/US$) and 1-year (-0.2% to N503.37/US$) contracts.
We expect the FX liquidity issues to remain over the short-to-medium term in the absence of any positive signal that denotes an improvement in FX supply relative to the pre-pandemic levels.
Meanwhile, at the money market, the overnight (OVN) rate dipped by 388bps to 12.6%. The rate started the week pressured, following debits for NTB and FX auctions at the top of the week.
However, inflows from FAAC allocation (c. N442.83 billion) and OMO maturities (NGN40.00 billion) were enough to saturate the market and drive down the OVN rate.
We note that the system liquidity closed higher at a net long position of N24.11 billion (vs net short position of N16.01 billion in the previous week).
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