The naira is expected to trade stable at the various foreign exchange windows on CBN continued intervention in the in the market.
“Whilst we believe increased demand for the US dollar could weigh on foreign reserves, we expect the impact of CBN weekly intervention in the FX market to keep rates at similar levels across market segments,” analysts at Afrinvest noted.
Last week, the CBN continued with its weekly FX intervention sales, offering US$210.0m – on Monday, May 14, 2018 and $293.0m on Friday, May 18, 2018 via the Wholesale Secondary Market Intervention Scheme (SMIS) window in a bid to sustain liquidity levels and maintain stability in all segments of the market.
However, the external reserves declined for three consecutive days in the week to settle at US$47.8 billion as of Thursday.
Based on the continued intervention, the naira traded at similar level all through the week. The CBN Spot rate opened the week at N305.80/$1.00, unchanged from previous week’s close. However by midweek, it depreciated 5kobo to N305.85/$1.00 and maintained this level till the end of the week.
Similarly, the naira remained flat at the parallel market, trading at N362.00/US$1.00 throughout the week. At the Investors’ & Exporters’ (I&E) FX Window, the NAFEX rate opened the week at N361.18/$1.00 and subsequently traded at this rate till the end of the week. Activity level in the I&E Window waned in the week as total turnover declined by 21.7 percent to $1.0bn (On Thursday) from US$1.3bn recorded in the previous week.
In the FMDQ OTC futures market, the total value of open contracts of the Naira settled OTC futures increased by US$110.4 million to $3.8 billion relative to $3.7 billion recorded the previous Friday, which implies a 3.0 percent increase in market size.
The APRIL 2019 instrument (contract price: N362.44) is the most subscribed with a total value of US$42.0m while SEPT 2018 instrument (contract price: N361.39) is the least subscribed with a total value of $507.0 million.