Update on naira’s huge fall in parallel market

Naira reportedly falls to N902.45/$ at official window, N1,340/$ at parallel market.

Across the foreign exchange.8forez) market, the naira continued to face increased pressure due to the demand-supply imbalance.

In the NAFEM window, the United States Dollar (USD) appreciated by 1.3 per cent week/week (w/w) against the naira to N902.45/$1.00.

Also, activity level fell 33.3 per cent w/w to settle at $505.8 million.

At the parallel market, the dollar gained 7.6 per cent w/w against the Naira, reaching N1,340.00/$1.00 at the close of trading.

“This week, we expect the naira to remain pressured across forex segments due to CBN constrained capacity to significantly boost supply.

Last week, Brent crude oil price inched higher by 1.6 per cent w/w to close at $78.48/bbl. amid escalating tension in the Middle East and oil output disruptions in the US. Relatedly, the International Energy Agency (IEA) revised its 2024 demand forecast upward to 1.24mbpd. Meanwhile, on the domestic front, Nigeria’s foreign reserves gained 41bps w/w to $33.2 billion (16th of January 2024).

System liquidity rose 64.9% w/w to N629.8 billion, as net inflows from SLF (N1.1trn), and primary market repayment (N65.9bn) offset outflows via the Open Market Operation (OMO) auction (N301.0bn). Regardless of the improved system liquidity, OPR and OVN rates closed this week higher by 5.5ppts apiece at 21.1% and 23.3% respectively.

In the primary market segment, the CBN sold OMO instruments worth N301.0 billion across the 92, 183, and 365-day tenors.

The 365-day instrument recorded the most buy interest with bid-to-cover ratio of 3.3x, while the 92 and 183-day instruments posted a bid-to-cover ratio of 0.2x apiece.

Overall, stop rates across the 92, 183, and 365-day tenors fell 0.5ppt, 0.5ppt and 0.3ppt from the last auction to 10.0 per cent, 13.5 per cent, and 17.5 per cent respectively.