Market Expectations: Surging liquidity, naira depreciation anticipated
By Samuel Bankole
The Central Bank of Nigeria (CBN) is expected to retire about N224 billion in matured Open Market Operation (OMO) Treasury bills this week, which will further increase the level of liquidity in the market, push down interest rates and increase pressure on forex market, according to currency dealers.
Traders said with the planned injection of funds from OMO maturity and refunds made on Friday by the CBN on Cash Reserve Ratio (CRR), the market is expected to stay liquid, see more demand for local fixed-income assets and on the forex market.
The cost of borrowing on the interbank market for the overnight fund was slightly up 2.71 percent from 1.39 percent on Friday, traders said, this is seen falling this week as the market receives increase liquidity.
The naira is also seen under pressure as market liquidity rises and demands mount on the available currency in the market, traders said.
At the forex market, NAFEX opened the week at N385.71 per dollar against N385.95 a dollar last week amidst thin dollar liquidity.
Sources said the CBN has commenced clearing of the backlog of dollar demand by offshore investors through the Investors and Exporters’ (I&E) forex window.
“The CBN is selling around $125 million per week to foreign investors who want to repatriate their funds from Nigeria to their home countries.
“The aim is to clear out all outstanding demand which was initially put at $2 billion by the central bank,” a chief executive of a drugs manufacturing firm told one of our correspondents.
Nigeria’s foreign exchange reserves were up marginally to $35.68 billion last week from $35.66 billion in the previous week.
The naira open at N461 to the dollar on the parallel market on Monday compared with N460 to the dollar it closed last week and expectations is that the local currency could depreciate slightly this week due to demand pressure.