In a remarkable turn of events, the Naira demonstrated resilience in the official foreign exchange (FX) market, surging by 1.33 percent despite facing a severe liquidity crunch. On Tuesday, the Investors’ and Exporters’ (I&E) forex window witnessed the dollar being quoted at N745.19, strengthening from N755.27, as reported by FMDQ data.
This impressive Naira appreciation was driven by a decrease in demand for the dollar, although the market grappled with low liquidity. The scarcity of willing buyers and sellers to meet the demands resulted in diminished trading activities, causing the daily FX market turnover to shrink by 36.54 percent to $81.12 million, down from the $127.82 million recorded on Friday.
Meanwhile, in the parallel market, also known as the black market, the Naira faced a slight depreciation against the dollar by the close of business as demand saw a modest uptick. The dollar concluded trading at N1,005 during the evening session after briefly recovering to N1,000 earlier in the day.
Notably, on Tuesday, the Naira gained 0.79 percent (N8) against the dollar as the foreign exchange market resumed operations after the independence holiday. The market opened with the dollar trading at N1,000, a dip from the N1,008 rate observed on Friday in the parallel market.
Turning to the money market, the Nigerian treasury bills (NT-Bills) secondary market exhibited a mildly positive trend. The average yield across the curve decreased by 1 basis point to 7.27 percent from 7.28 percent on the previous day. While medium-term and long-term maturities saw a 1 basis point reduction in average yields, short-term maturities remained unchanged at 3.69 percent. Notably, the NTB maturing on June 6, 2024, witnessed mild buying interest with a 2 bps decrease in yield.
Furthermore, the Central Bank of Nigeria (CBN) conducted its scheduled Primary Market Auction on September 27, selling NT-Bills worth N177.12 billion across various tenors. The stop rates for the 91-day, 182-day, and 364-day tenors cleared at lower rates, underscoring the high demand. The auction witnessed substantial oversubscription, emphasizing investor confidence in these instruments.
In the overnight and open repo markets, rates witnessed a decline, with the Overnight (O/N) rate decreasing by 1.95 percent to 1.45 percent and the Open Repo (OPR) rate decreasing by 1.70 percent to 1.00 percent, highlighting improved liquidity conditions.
As the Naira navigates the challenging terrain of forex markets, these developments showcase its tenacity and ability to adapt in the face of adversity. Stay tuned for more updates on this ever-evolving financial landscape.
