Naira Records Marginal Rise
Obinna Chima
In line with analysts’ expectations, the naira appreciated at all alternative market segments against the dollar last week.
The local currency appreciated week-on-week by 0.49 per cent at the bureau de change (BDC) segment to close at N205 to a dollar on Friday.
Similarly, a report by Cowry Asset Management Limited at the parallel market segment, the naira advanced by 0.48 per cent to close at N206 to a dollar as at last Thursday, compared with the N207 to a dollar it attained the preceding Friday.
However, the naira closed steady at the interbank market at N199.13 to a dollar on Friday, while the Central Bank of Nigeria’s clearing rate remained firm at N197 to a dollar.
“This week, we expect the naira to weaken at the alternative market segment as traders and travellers increase their demand for dollar cash in response to the limit on dollar denominated cards,” analysts a Cowry Asset stated. Interbank Market
Money market rates surged high at the beginning of the week as liquidity opening balance was at a low level of N89.9 billion.
However, according to analysts at Afrinvest West Africa Limited, the scramble for funds worth N88.1 billion at the Standing Lending Facility (SLF) by deposit money banks (DMBs) took last Monday’s open buy back (OBB) and overnight rates to their week’s high of 78.3 per cent and 80.3 per cent respectively. But money market rates settled at 13.1 per cent for OBB and 13.4 per cent for overnight on Friday.
Afrivest argued that the liquidity level in the market would remain moderate on the back of bond maturity of N535 billion and treasury bills of N169.4 billion expected to hit the system on Thursday. Bond Market
Investor sentiments toward bond continued to garner increasing momentum around the fundamentals of bond market. Whilst the sovereign credit risk rating remains a noninvestment grade - S&P: B+ and Fitch: BB-, investors appeared to be optimistic about near to medium term performance of bonds.
“Outlook on yields still favours bond prices as no hike is expected in the benchmark policy interest rate given the macroeconomic headwinds around external reserves accretion. Bond instruments across tenors during the week traded sideways but with an overall bullish momentum in line with the outing in prior two weeks.
“Investor appetite largely moved in favour of short to medium term bond instruments as issues around Nigeria’s sovereign credit rating are still of main concern; hence, the low appetite for long tenured bonds. Average yields in the week opened at 14 per cent, traded as high as 14.6 per cent before moderating to 13.9 per cent and eventually closed at 14.1 per cent,” the Afrinvest report added.
However, April-23 2015 bond instrument worth N535 billion would mature this week. This is expected to impact on market liquidity.
“The sovereign yield curve continues to maintain its normality though showed some form of moderation relative to the previous week. Investors continue to factor near term country risks into yield pricing with much more attraction for shorter tenured bonds. Recent buffer for the bond market has been the clarity in domestic polity and the relative stability in foreign exchange.
“Our expectation for the market in the week remains positive on the back of funds flow across markets given that Nigerian yield environment is still more attractive relative to peers in emerging markets. Nevertheless, uncertainties around future interest rate expectation, possible exchange rate risks due to falling oil prices and reserves and frail market sentiments may constitute a drag,” they added. Naira Debit Cards
The Central Bank of Nigeria (CBN) last week reviewed downward the spending limit on the usage of the naira denominated debit cards for transactions abroad, from $150,000 per person annually, to $50,000 per person annually. The daily cash withdrawal limit on the card was also fixed at $300 per person. The policy became effective from last Monday, according to the banking sector regulator.