Damp week as oil prices slump, naira shrinks, foreign reserves fall

Crude oil and currency markets were in the red last week with all indicators looking southwards. Oil prices inched lower last week with the benchmark Brent crude down by 3.1 per cent week-on-week(w/w) to $66.6/bbl. despite increasing demand on the back of eased restrictions in Europe.

On the domestic front, the external reserves declined marginally by 0.5 per cent w/w to $34.4 billion.

At the parallel market, naira depreciated by N1.00 to N485/$. At the Investors’ & Exporters’ (I&E) Window, naira depreciated by 33 kobo to N412.00/$. Activity level in I&E Window however surged 125.2 per cent to $624.9 million from $277.5 million recorded in the previous week.

The total value of open contracts of the naira at the FMDQ Securities Exchange (SE) FX Futures Contract Market rose 1.0 per cent ($47.6 million) to $4.8 billion. The JULY 2021 instrument (contract price: N423.29) received the highest subscription of $20.9m which took total value to $236.3 million. On the other hand, the JUNE 2021 instrument (contract price: ₦421.86) recorded the least demand totaling $6.2 million, taking total value to $289.8 million.

Last week, the interbank rates, the Open Buy Back (OBB) and Overnight (OVN) fell at the start of the week, down 13.4 basis points (bps) and 15.1ppts to settle at 13.5 per cent and 13.8 per cent respectively as system liquidity closed at N33.0 billion. By the end of the week, the rates closed at 16.5 per cent and 17.0 per cent, down 10.4ppts and 11.9ppts w/w as system liquidity closed at N79.3 billion.

On Thursday, following the inflow from Open Market Operation (OMO) maturities worth N60.0 billion, the Central Bank of Nigeria (CBN) conducted an OMO auction worth N20.0 billion to mop-up liquidity in the system, although only instruments worth N14.5 billion was sold. Demand for the 355-day instrument auction was robust (Offer: N10.0bn; Subscription: N15.6 billion; Sale: N10.0 billion) as it was oversubscribed by 1.6x with stop rate of 10.1 per cent. Alternatively, the 89-day instrument (Offer: N5.0 billion; Subscription: N2.0 billion; Sale: N2.0 billion) was undersubscribed by 0.4x with stop rate of 7.0 per cent. Similarly, the 180-day instrument (Offer: N5.0 billion; Subscription: N2.5 billion; Sale: N2.5 billion) was undersubscribed by 0.5x with stop rate of 8.5 per cent.

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