Analysts at Cowry Asset Management Limited has declared that the nation’s currency, the naira, which has consistently been under pressure is expected to stabilise this week, following the introduction of 50 percent Cash Revenue Ratio (CRR) on public sector funds by the Central Bank of Nigeria (CBN), at have said.

Data from Financial Markets Dealers Association (FMDA) have indicated that naira strengthened against the dollar on Friday, gaining 51 kobo at the inter-bank market to close at N160.83/$ compared to N160.92/$, the previous day.

The CBN at its bi-weekly Wholesale Dutch Auction System (WDAS) offered and sold a total of $600 million to 38 deposit money banks (DMBs) at N155.76/$. This represents a 14.29 percent decline from preceding week’s figures and suggesting lower demand.

The weekly report of the Cowry Asset shows that the naira/dollar exchange rate steadied at the official market at N155.76/USD as well as the bureau de change at N162.50/USD. Despite declining foreign exchange reserves, the naira/USD exchange rate closed favourably in other foreign exchange market segments. The local currency appreciated at both the inter-bank market and parallel market by 0.33 percent (or N0.53) and 0.31 percent (or N0.50) to N160.83/USD and N163/USD, respectively.

Against other major trading pairs, the British pound sterling and the euro, the naira weakened by 0.94 percent (or N2.22) and 1.10 percent (or N2.25) to N239.93 and N206.65, respectively.

According to the report, on a week-on-week basis, Nigerian Inter-Bank Offered Rates (NIBOR) movement was mixed at the money market amid recalls by lenders to cover forex demand (worth around N93.46 billion) and investments in auctioned treasury bills.

The Central Bank of Nigeria (CBN) auctioned treasury bills worth N144.88 billion via primary market. They consisted of 91-day bills worth N24.89 billion; 182-days worth N30.00 billion; and 364-day bills worth N60.00 billion.

However, maturing treasury bills totalling N171.11 billion hit the financial system on Thursday, July 25, viz: 91-day bills worth N24.89 billion; 139-day bills worth N56.22 billion; 182-day bills worth N30.00 billion and 364-day bills worth N60.00 billion.

Consequently, NIBOR for call, 60 days and 90 days moderated to 10.24 percent (from 10.25 percent), 11.04 percent (from 11.07 percent) and 11.29 percent (from 11.32 percent), respectively.

However, 30 days NIBOR increased to 10.86 percent (from 10.82 percent). This week, 161-day treasury bills worth N210.57 billion will mature via Open Market Operation on Thursday, August 1.

As the inflow will significantly boost system liquidity, we expect a resultant decrease in NIBOR rates for all tenor buckets.