SAT DEC 14 2024-theGBJournal| The naira rose this week by 2.2% w/w to N1,544.35/USD following the Central Bank of Nigeria’s (CBN) intervention which saw the apex authority sell c.USD124.60 million to authorized dealers.
Also, FX reserves grew by USD210.73 million w/w to USD40.53 billion (12 December).
Total turnover at the NAFEM as of 10 November decreased by 70.5% WTD to USD619.61 million, with trades consummated within the N1,591.60/USD – N1,700.00/USD band.
In the forwards market, the naira rates increased across the 1-month (+2.5% to N1,580.29/USD), 3-month (+4.4% to N1,639.10/USD) contracts, 6-month (+3.6% to N1,726.75/USD) and 1-year (+5.0% to N1,900.89/USD) contracts.
We note the slowdown in FPI inflows, which has further constrained overall FX liquidity despite the CBN’s moderate interventions.
While we expect the CBN to maintain the tepid FX intervention, we think the naira will remain under pressure in the short term if FPI inflows do not improve substantially.
The overnight (OVN) rate expanded by 475bps w/w to 32.9% as OMO auction (NGN1.56 trillion) and net NTB issuance (N252.13 billion) debits outweighed inflows from OMO maturities (N101.80 billion) and FGN bond coupons (N1.45 billion), thereby pressuring system liquidity.
Thus, the average liquidity closed at a net short position of N1.14 trillion (vs net long position of N628.56 billion in the prior week).
Next week, in the absence of any notable inflows to support system liquidity, we expect the OVN rate to remain elevated.
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