External reserves shed $133m to stable at $36.32bn

The nation’s external reserves monitored by the Central Bank of Nigeria (CBN) as of 8th June 2020, stood at $36.32 billion, representing a decline of $132.03 million week-on-week (w/w).

The data obtained from the official website of the CBN showed that the foreign reserves dipped from $36.45 billion to $36.32 it stood last Thursday.

This is even as the foreign exchange market saw the local currency, naira, shed marginally by 0.19 percent week-till-date (wtd) to N387.75 against the dollar at the Investors & Exporters (I&E) window and by 1.1 percent to N455.00 against the dollar in the parallel market.

The naira, however, in the forwards market gained ground against the dollar in the three-month (+0.03 per cent to N391.20/$) and 6-month (+0.05 per cent to N396.70/$) contracts.

But the local currency depreciated against the dollars in the 1-month (-0.01 per cent to N387.41/$), and 1-year (0.59 per cent to N416.53/$) contracts.

Commenting, analysts at Cordros Capital explained that the widening current account (CA) position suggests that odds are stacked against the naira.

“Beyond that, as the economy gradually reopens, the resumption of foreign exchange sales to the BDC segment of the market will place an additional layer of pressure on the reserves as the CBN funds the backlog of unmet FX demand,” they stated.

Meanwhile, the overnight (OVN) rate expanded by 684 basis points w/w to 16.7per cent. Outflows from CRR (N216.00 billion), Sukuk bond (N162.58 billion) and FGN bond (N100.00 billion), OMO auction (N80.00 billion) and FX auction debits outweighed inflows from OMO maturities (N337.94 billion) and retail FX refunds (N337.94 billion).

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Trading in the treasury bills secondary market was bullish, as average yield in the space contracted by 47 basis points to 4.9 per cent.

Across the segments, yields contracted at the OMO market by 13 basis points to 4.9per cent following improved trading volumes and at the NTB market by 122 basis points to 2.2 per cent, as market participants covered lost bids at the NTB PMA.

At the PMA, demand continued to outweigh supply, as there was an oversubscription of 6.1x on N14.61 billion worth of bills on offer.

The auction closed with the CBN rolling over N2 billion of the 91-day, N2billion of the 182-day and N10.61 billion of the 364-day – at respective stop rates of 1.80 per cent (previously two per cent), 2.04 per cent (previously 2.20 per cent), and 3.75 per cent (previously 4.02 per cent).

At the OMO auction, the CBN fully allotted N80 billion worth of bills – N20 billion of the 82-day, N20 billion of the 159-day and N60 billion of the 341-day – at respective stop rates of 4.95 per cent, 7.79 per cent, and 8.99 per cent.

Trading in the FGN bond secondary market was bullish, as investors covered lost bids at the PMA. Consequently, the average yield across instruments contracted by 72 basis points to close at 9.4 per cent.

At the auction, instruments worth N150.00 billion were offered to investors through re-openings – 12.75 per cent APR 2023 (Bid-to-offer: 3.4x; Stop rate: eight per cent), 12.50 per cent MAR 2035 (Bid-to-offer: 2.5x; Stop rate: 11.0), and 12.98 per cent MAR 2050 (Bid-to-offer: 4.7x; Stop rate: 12.2 per cent).

Despite subscriptions across instruments settling at N545.16 billion, the DMO eventually allotted instruments worth N100.0 billion, resulting in a bid-cover ratio of 5.5x.

“We expect demand to be influenced by the tight liquidity next week. Nonetheless, we expect yields to pare, as investors’ demand should remain focused on this side of the market, given the relatively attractive yields compared to the treasury bills space,” analysts at Cordros capital added.