Analysts project pressure on fx market as reserves, oil prices declined
Analysts at the Lagos-based United capital projected increased pressure on the domestic foreign exchange market this week on the back of falling global crude oil prices and sustained intervention in the forex market by the Central Bank of Nigeria (CBN).
They said with the continued decline in the country’s foreign exchange reserves, which have seen 0.2 percent week-on-week declines to $35.8 billion could put the naira under pressure from endusers and speculators.
The analysts also highlighted outlooks for the economy, money, debt and equity markets for the week with expectations high on buying of equity by investors on the back of rising liquidity in the system
“This week, developments in the currency market, the publication of the August-2020 inflation report, which we expect to maintain its recent uptrend, as well as further policy announcement from the authorities, will drive activities in the economy,” the analysts wrote in the firm note to clients on Monday.
On forex market
This week, we expect a sustained pressure on the FX reserves as crude oil price weakens and CBN sustains intervention sales to clear the existing backlog of FX demands across its various windows.
On Bond Market
This week, we expect the performance at the crude oil market as well as the outcome of the Fed’s meeting to guide foreign investors sentiment towards Nigeria’s Eurobonds. While for the domestic bond market, we expect increased demand as coupon credits of c. N142.1bn is scheduled to hit the system this week.
On the equity market
This week, we expect to see some buying interest in the equity market amid anticipated sizable maturities in the debt market scheduled to hit the system.
On the money market
This week, we expect financial system liquidity to remain buoyant for the most part of the coming week, lifted by anticipated maturities from NTB (N178.75bn) and OMO (N350.0bn) bills as well as Bond coupon payments (N142.1bn). In turn, we expect sentiments to remain bullish at both the primary and secondary money market.