Naira Closes Week at N1,373.25/$ as External Reserves Hit $49.26 Billion
By Aboki Forex —
The naira ended the week at N1,373.25 per dollar at the official foreign exchange market, gaining 0.16 per cent. External reserves rose by 0.57 per cent to $49.26 billion, providing support for the local currency.
At the parallel market, the naira weakened slightly, depreciating by about 15 basis points to settle around N1,372 per dollar. Last week’s trading suggested continued consolidation of the convergence between market segments.
The foreign exchange market recorded mixed performance during the week. Rising reserves supported the naira despite ongoing liquidity challenges and demand pressures.
Oil Prices Slip
In the global oil market, Brent crude futures traded largely flat at $93.84 per barrel early on Friday. West Texas Intermediate (WTI) crude slipped by 0.12 per cent to $88.94 per barrel. Later in the session, Brent fell by 1.74 per cent to $92.08 per barrel, while WTI declined by 1.52 per cent to $87.55 per barrel.
Analysts attributed the recent weakness in oil prices to market adjustments following April’s sharp rally, which was driven by supply disruptions.
Naira Outlook
Analysts projected that the naira would likely maintain a mixed trend in the near term. Stronger external reserves will provide support, but foreign exchange demand and liquidity shortages will constrain gains. The official market is expected to remain relatively stable, while the parallel market may continue to experience volatility due to unpredictable dollar supply.
Money Market Liquidity Surges
Liquidity conditions in the money market remained strong throughout the week. System liquidity opened at N3.84 trillion on Monday, recovering from the preceding Friday’s post-open market operations (OMO) auction level of N2.79 trillion. It later rose to N6.02 trillion at the close of the week.
The increase was driven by higher placements at the Central Bank of Nigeria’s (CBN) standing deposit facility (SDF), reflecting reduced borrowing needs and lower funding pressures. A major boost came on Tuesday when N1.97 trillion OMO instruments matured, pushing system liquidity sharply higher to N5.92 trillion.
Despite the significant liquidity injection, interbank rates remained stable. The open repo (OPR) rate closed at 22 per cent, while the overnight (O/N) rate remained unchanged at 22.19 per cent throughout the week.
NIBOR and NITTY Movements
The Nigerian Interbank Offered Rate (NIBOR) recorded mixed movements but generally declined across longer tenors. Overnight NIBOR remained unchanged at 22.25 per cent. The one-month, three-month and six-month tenors fell by 17 basis points, 70 basis points and 88 basis points respectively to 22.65 per cent, 22.97 per cent and 23.28 per cent.
The Nigerian Treasury Bill True Yield (NITTY) curve traded mixed. The one-month and three-month tenors increased by 24 basis points and 16 basis points to 16.04 per cent and 16.53 per cent respectively. The six-month and 12-month tenors declined by 13 basis points and eight basis points to 17.19 per cent and 18.85 per cent.
Treasury Bills and OMO Auction
Trading in the secondary treasury bills market remained moderately active despite the shortened trading week. Strong investor demand, supported by abundant liquidity, pulled average benchmark yields down by six basis points week-on-week to 17.51 per cent.
At the OMO auction held on May 29, investor appetite remained strong, particularly for the 102-day instrument. It attracted subscriptions valued at N1.73 trillion against an offer size of N200 billion. The CBN eventually allotted N1.72 trillion at a stop rate of 20.37 per cent.
The 11-day instrument also attracted significant demand, recording subscriptions of N225 billion and sales of N220 billion at a stop rate of 21.8 per cent. This highlighted investors’ preference for short-term instruments. In contrast, the 39-day tenor received subscriptions of N588 billion but recorded no sales, suggesting the apex bank rejected bids due to pricing concerns.
Outlook for the Week Ahead
Looking ahead, analysts expect liquidity conditions to remain robust as the market enters a new month. Expected inflows include about N2.72 trillion from OMO maturities and N631.46 billion from Nigerian Treasury Bill maturities, bringing total inflows to approximately N3.35 trillion.