MARKET NEWS

LAGOS – Financial experts from Cordros Securities have cautioned the monetary authority that the nation’s currency, Naira is likely to remain under pressure amid persistent global uncertainty, driven by the US tariff-induced trade tensions that continue to trigger capital outflows.

The financial experts in their Weekly Economic and Market Report, noted that the naira experienced volatility during the week as demand pressures persisted. 

“Nonetheless, the robust intervention by CBN, selling USD634.85 million to authorised banks, helped mitigate a steeper devaluation.

Consequently, they noted that the FX rate depreciated by 2.0% to NGN1,617.00/USD. Gross FX reserves declined for the fourth consecutive week by USD102.14 million w/w to USD38.04 billion (April 10). 

In the forwards market, the naira rates decreased across the 1-month (-3.0% to NGN1,670.42/USD), 3-month (-3.6% to NGN1,752.18/USD), 6-month (-5.2% to NGN1,870.78/USD) and 1-year (-7.5% to NGN2,087.66/USD) contracts.

“Compounding this are foreign investors’ concerns over declining oil earnings, stemming from the slump in oil prices, a development that could lead to a trade deficit and a shortfall in the current account. 

“Nevertheless, CBN’s sustained interventions are expected to cushion the naira from sharp depreciation in the near term” , they said.

Arguing that the overnight (OVN) rate for last week expanded by 10bps w/w to 27.0%, driven by debits for market funded FX purchases from the CBN (c. NGN220.00 billion), they noted that by implication, the average system liquidity weakened, albeit remaining in the positive terrain, settling at a net long position of NGN425.84 billion compared to a net long position of NGN1.33 trillion in the previous week.

They, however, said: “Barring any liquidity tightening measures by the CBN, we expect inflows from FGN bond coupon disbursements (NGN183.07 billion) to boost system liquidity, likely driving a moderation in the OVN rate”.

The financial experts, noted that at the global stage, the United States’ Bureau of Labor Statistics (BLS), consumer prices in the world’s largest economy dropped to a 6-month low in March, easing by 40bps to 2.4% y/y (February: 2.8% y/y),below market expectations (2.6% y/y). 

“We highlight that the price moderation is a firm reflection of a slowdown in energy inflation (-3.3% y/y vs February: -0.2% y/y) due to lower gasoline and fuel oil following the slump in crude oil prices. At the same time, core inflation (+2.8% y/y vs February: +3.1% y/y) slowed to a 48-month low in line with the deceleration in prices for shelter, used cars & trucks, transport services, medical care commodities, and apparels”.

“Looking ahead, we anticipate headline inflation to remain above the 2.0% target in the short term, driven by the cascading effect of tariffs imposed by the Trump administration, which we believe will further heighten inflationary risks. However, weaker oil prices will remain an upside for US inflation”, they said.