The nation’s currency, the Naira strengthened against the United States Dollar at the Bureaux De Change and Parallel segment of foreign exchange market following the announcement of a flexible exchange rate management regime by Central Bank of Nigeria.
The new policy, which adopts a single market structure through the autonomous/inter-bank market, also derecognises the CBN clearing rate and thus effectively collapse the number of forex market segments operating in the country from four to three.
Specifically, at the Bureau De Change the naira appreciated by 2.47 to N355 per dollar while it grew by 1.08 per cent to N365 to a dollar at the parallel market segments, as end-users’ foreign exchange outlook improved. However at the derivatives market segment, foreign exchange forwards showed general appreciation in most dated contracts – the spot rate, one month, three months and six months dated contracts appreciated by 0.72 per cent, 0.36 per cent, 1.52 per cent and 2.34 per cent at N197.50/Dollar, N200.73/Dollar, N203.93/Dollar and N209.09/Dollar respectively.
Forex dealers said that, interbank trading was scheduled to start on Monday, 20 June, 2016; with anticipate of an initial devaluation from the official exchange rate of N197 per dollar to a rate that will should be closer to the parallel market. Cowry Assets advice for a bullish adjustment of the rate around N350 to a dollar which would allow the Naira enough headroom to appreciate instead of depreciate. An appreciation from the commencement interbank rate would help the market regain confidence faster than a more conservative opening rate that is below the equilibrium rate and subject to further depreciation.
On the other hand, the Nigerian interbank money market witnessed 14.00 per cent continued liquidity strain which led to higher costs of funds. In the just concluded week, Central Bank of Nigeria auctioned treasury bills worth N341.44 billion, through 91-day bills worth N48.10 billion; 182-day bills worth N29 billion; and 364-day bills worth N152.34 billion.
Also, standing lending facility (SLF) increased by 173.25 per cent to N281.15 billion, as deficit units accessed the official window, while standing deposit facility (SDF) declined by 3.47 per cent to N594.75 billion. NIBOR for overnight funds and one month fell to 2.15 per cent (from 4.33 per cent) and 8.06 per cent (from 9.04 per cent) respectively. However, three months and six months increased to 12.34 per cent (from 11.87 per cent) and 13.89 per cent (from 13.25 per cent). Meanwhile, yields on the Nigerian Interbank True Treasury Bills Yield mostly increased amid financial system liquidity strain – yields on the three months, six months and 12 months maturities increased to 8.34 per cent from 7.42 per cent and 9.82 per cent from 9.08 per cent and 15.23 per cent from 11.83 per cent respectively.
