NAIRA GAINS DESPITE POOR LIQUIDITY

Despite low liquidity at the official market, the naira strengthened against the dollar on Tuesday across all foreign currency (FX) markets.

When compared to Monday's $122.43 million, liquidity at the Investors and Exporters (I&E) FX window, fell by 39.08 percent to $74.58 million on Tuesday.

The dollar was quoted at N461.50 at the end of trade on Tuesday, up 0.14 percent from the previous closing of N462.17 on Monday at the I&E window, Nigeria's official market.

According to FMDQ data, the currency dealers who took part in the FX auction on Tuesday kept their bids between N446.00 (low) and N462.00 (high) per dollar.

The local currency slightly increased on the illicit market, gaining 0.13 percent (N1) as the dollar was exchanged at the rate of N753 on Tuesday as opposed to N754 the day before.

Last week, the N461.50/US$1 exchange rate in the investors and exporters window increased by 0.05 percent. The Central Bank of Nigeria (CBN) continued to intervene in the various FX windows, causing its (FX) reserves to decline elsewhere by 0.06 percent to $37.02 billion.

The FX reserve position is still very close to its historical high, and we doubt that the CBN wants to see the exchange rate fall.

The I&E window rate, or something very similar to it, can therefore be maintained for at least a few months, according to analysts at Coronation Asset Management.

According to a report by FSDH research, on Tuesday at the money market, the Overnight (O/N) rate closed unchanged at 10.81 percent and the Open Repo (OPR) rate closed unchanged at 10.50 percent.

Nigerian Treasury Bills ended flat, with the average yield throughout the curve maintaining constant at 1.79 percent. Average rates were steady at 1.04 percent, 1.17 percent, and 2.48 percent for short-, medium-, and long-term maturities, respectively.

On Wednesday, the CBN will hold a primary market auction to roll over NT-bill maturities totaling N217.09 billion over 91-day, 182-day, and 364-day tenors (N1.71 billion, N1.24 billion, and N214.14 billion, respectively).

The average yield throughout bills closed unchanged at 1.84 percent. According to the report, the average yield for short-term maturities remained constant at 1.84 percent.

A good closing for the secondary market for bonds was achieved on Tuesday as the curve dropped by 19 basis points to conclude at 13.49 percent from 13.68 percent the day before. The short and medium tenor average yields on the curve both fell by 69 basis points and 27 basis points, respectively. The bond with the maturity of 26-APR-2049, nevertheless, had the worst performance, with a 3 bps yield increase, while the average yield for the curve's long tenor, however, closed level.

The 10-year FGN FEB 2028 (N90 billion), 10-year FGN APR 2032 (N90 billion), 20-year FGN APR 2037 (N90 billion), and 30-year FGN APR 2049 (N90 billion) tenors will be reopened for the February 2023 Primary Market Auction, according to the Debt Management Office's (DMO) FGN Bonds Offer Circular. Bonds will be auctioned on February 13 with settlement taking place on February 15, 2023.