Naira Appreciates on Low Demand for Dollars

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The Nigerian Naira gained 1.33 percent against the US Dollar at the official foreign exchange (FX) market, trading at N745.19 compared to N755.27 on the previous trading day. This appreciation followed a moderation in demand for dollars amid low liquidity in the market. However, at the parallel market, the Naira weakened slightly against the Dollar, closing at N1,005. The FX market turnover decreased by 36.54 percent to $81.12 million from $127.82 million. In the money market, the Nigerian Treasury Bills (NT-Bills) secondary market closed with a mildly positive note.

Key Points:

  • The Naira appreciated by 1.33 percent against the US Dollar in the official FX market due to lower demand and decreased liquidity.
  • Daily FX market turnover declined by 36.54 percent, with a turnover of $81.12 million on Tuesday compared to $127.82 million on the previous trading day.
  • At the parallel market, the Naira weakened slightly against the Dollar, closing at N1,005 after recovering from N1,000 in morning trading.
  • In the money market, the Nigerian Treasury Bills (NT-Bills) secondary market closed on a mildly positive note, with an average yield across the curve decreasing by 1 basis point to 7.27 percent.
  • The Central Bank of Nigeria (CBN) conducted its 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 lower at 4.99 percent, 6.55 percent, and 11.37 percent, respectively.
  • The Overnight (O/N) rate decreased to 1.45 percent, while the Open Repo (OPR) rate decreased to 1.00 percent.

Analysis: The Naira’s appreciation in the official FX market is attributed to lower demand for dollars and decreased liquidity. This indicates a short-term positive trend for the Naira. However, the slight weakening in the parallel market suggests ongoing fluctuations in currency exchange. The decline in FX market turnover may be a result of cautious trading due to market conditions. The NT-Bills market showed mild positive movements, indicating some stability in the money market. The oversubscription at the Primary Market Auction indicates strong demand for NT-Bills, potentially due to the attractive stop rates offered.

BD

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