Market News

The naira weakened to N1,380.58 per dollar at the official market, declining by 1.93 per cent week-on-week, as sustained foreign exchange demand continued to outpace supply, even as oil prices surged and system liquidity remained elevated at N5.93 trillion.

Pressure in the foreign exchange market intensified last week, with the naira also depreciating by 2.66 per cent at the parallel market to close at an average of N1,393/$1.

The weakness was largely driven by increased demand for dollars for international settlements and import-related obligations, further straining available FX supply.

On the global commodities front, crude oil prices rallied strongly, with futures climbing above $98 per barrel amid heightened geopolitical tensions involving the United States/Israel and Iran.

Despite this, the country’s external reserves recorded a marginal decline, falling by 0.7 per cent to $49.48 billion, reflecting a depletion of about $350 million and signalling continued pressure on Nigeria’s FX buffer.

Analysts noted that while elevated oil prices could provide some short-term relief, persistent FX demand and declining reserves may keep the naira under pressure in the near term, with the currency expected to trade within a volatile band.

In the money market, liquidity conditions remained robust but moderated compared to the previous week. System liquidity closed at a net surplus of N5.93 trillion, down from N8.24 trillion, following outflows linked to settlements from recent auctions conducted by the CBN.

Interbank rates reflected mixed movements amid the liquidity dynamics. The Nigerian Interbank Offered Rate (NIBOR) trended downward during the week, supported by inflows from N800 billion in maturing open market operation (OMO) bills.

However, offsetting debits from OMO and treasury bills settlements kept the overnight NIBOR unchanged at 22.38 per cent. The overnight rate edged up slightly by five basis points to 22.26 per cent, while the funding rate held steady at 22.00 per cent.

In the treasury bills market, yields were largely mixed. The Nigerian treasury bills true yield (NITTY) curve edged higher across most short- and mid-term tenors, with yields on the 1-month, three-month, and six-month instruments rising by five basis points, 32 basis points and seven basis points, respectively.

However, the 12-month yield declined by 34 basis points, reflecting stronger investor demand for longer-dated instruments.

Activity in the secondary market remained subdued, although selective demand at the mid- to long-end supported prices, resulting in a 19 basis points decline in average yield to 17.76 per cent week-on-week.

At the treasury bills primary market auction, investor appetite remained exceptionally strong. The CBN offered N400 billion, but total subscriptions surged to N3.1 trillion, with allotments rising to N693 billion. Stop rates showed mild easing, with the 91-day rate unchanged at 15.95 per cent, while the 182-day and 364-day rates declined to 16.42 per cent and 16.43 per cent respectively.