SAT. 18 FEB, 2023-theGBJournal| Nigeria’s FX reserve maintained its descent for the fifth consecutive week, as the gross reserve position declined by US$ 42.21 million w/w to close at USD 36.78 billion (16 February 2023).
Meanwhile, the naira appreciated by 0.1% to N461.25/USD at the I&E window (IEW), with total turnover at the window (as of 16 February 2023) increasing by 24.1% WTD to US$437.42 million, as trades were consummated within the N446.00 – N478.71/USD band.
In the Forwards market, the rate on the 1-month (+0.4% to N486.88/USD) contract increased but declined on the 3-month (-1.5% to N493.97/USD), 6-month (+5.5% to N533.80/USD), and 1-year (-14.4% to N618.70/USD) contracts.
Analysts expect FX liquidity issues to remain over the short-to-medium term as we do not see any positive signal that denotes an improvement in FX supply relative to the pre-pandemic levels.
In line with our expectations, the overnight (OVN) rate inched higher by 669bps w/w to 17.8%, as funding for FGN bond (N770.56 billion) and FX auctions outweighed inflows from OMO maturities (N60.00 billion). As a result, the average system liquidity closed lower this week at a net long position of N218.41 billion (vs. a net long position of NGN452.55 billion in the previous week).
We expect a further squeeze in the financial system next week, as the debits for next week’s auctions (NTB, OMO & FX) will most likely offset the inflows from OMO maturities (NGN70.00 billion) and FGN bond coupon payments (N66.82 billion). Hence, we expect the OVN rate to trend higher.
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