Monetary authority’s defence may cushion naira pressure this week

The pressure on the naira is expected to continue at the alternative market this week due to consistent fall in external reserves.

The external reserves felled by 0.07 percent to $37.36 billion as at May 22, 2014 from $37.39 billion as at May 21, 2014.

However, the pressure is expected to moderate as the monetary authority continues its defence of the naira at least at the official market segment notwithstanding the continued depletion of the foreign reserves.

 “This week, we anticipate pressure at the alternative foreign exchange market segments against the backdrop of falling external reserves”, analyst at Cowry Asset Management Limited have said.

Last week, the official Naira/USD exchange rate steadied at N155.73 after the central bank sold USD730.74 million (or N113.79 billion) worth of foreign exchange at the bi-weekly Retail Dutch Auction (RDAS).

The exchange rate also steadied at N166.50/USD at the bureau de change. However, the naira appreciated marginally at the inter-bank market by 0.07% (or N0.11) to N162.05/USD while it strengthened by 0.3% (or N0.50) to N167.50/USD at the parallel market.

This week also, inter-bank rates are expected to increase on the back of outflows as investors participate in the bi-weekly CBN foreign exchange auction.

In the just concluded week, CBN auctioned treasury bills worth N122.33 billion via OMO, viz: 91-day bills worth N20.65 billion; 182-day bills worth N25 billion; and 364-day bills worth N75.68 billion. Also, treasury bills worth N122.33 billion matured, viz: 91-day bills worth N20.65 billion; 182-day bills worth N25 billion; and 364-day bills worth N75.68 billion.
 

Meanwhile, recent deductions of N111 billion from deposit money banks as their contributions to the sinking fund of the Asset Management Corporation of Nigeria further ensured that the Nigerian Inter-Bank Offered Rates (NIBOR) headed northwards for all tenor buckets.