Nigeria’s external reserves has continued to accrue growing by $2.4 billion or 5.7 per cent between March and April 11, 2019 on rising dollar inflow from foreign portfolio investors and higher oil prices as the naira weakened slightly at the Bureau de Change end of the foreign exchange market.
From N358.5 which it sold the previous week, the naira had receded last week at BDCs’ selling at N359 per dollar, just at it weakened slightly at the Investors and Exporters window to N360.32 to the dollar. It however remained stable at the Central Bank of Nigeria (CBN) window and the parallel market where it continued to sell at N307 and N360 to the dollar respectively.
External reserves which was at $43.075 billion at the beginning of the year had depleted to $42.316 billion as at March 1, 2019 before rising to $44.721 billion as at last week. Last week, the reserves had accrued further by $22.4 million, pulling the foreign reserves up from $41.68 billion which it was the prior week.
The accretion of the reserves had spurred the resumption of the CBN interventions in the forex market. Last week, CBN resumed its weekly sales of $210 million to support the naira. The wholesale segment of the market was offered $100 million, while the Small and Medium Enterprises (SMEs) segment received $55 million. Similarly, customers requiring foreign exchange for invisibles such as tuition fees, medical payments and Basic Travel Allowance (BTA), among others, were also allocated $55 million.
Analysts believe the accretion to the reserves is reflective of the rising inflow of foreign currency from portfolio investors as well as increased income stream form rising oil prices. The price of crude oil at the international market had risen month on month by 9.66 per cent to $63.89 per barrel while the price of Brent was up by 5.9 per cent month on month to $71.55 per barrel.
According to analysts at Afrinvest West Africa, the recent accretions to the reserves is largely driven by the increase in foreign portfolio buying interest in the fixed income market given attractive yields on assets.
Last week, activities at the bonds market showed improved level of activity across markets as yields on sovereign bonds instruments increasing on three of the five trading days. Consequently, average yield rose 11 basis points week on week to 14.38 per cent from 14.27 per cent in the previous week. However, long dated bonds recorded the least sell-offs as average yields rose by five basis points relative to average rise in yield of 21bps and 15bps for medium and short-term bonds respectively.
In the secondary market, the average Treasury bills yield declined by seven basis points to settle at 13.3 per cent. While activities were relatively tepid on the first day of the trading week, when the average yield increased by 1bps, there were yield declines on all other trading days save for Friday.
This week, the CBN is expected to hold primary market auction on Wednesday for the 91-day, 182-day and 364-day instruments for a total amount of N58.5 billion, while an equal amount is expected to mature.
The CBN is also expected to re-commence Open Market Operations (OMO) auctions this week, given that Instruments worth N165.9 billion are expected to mature. A total of N58.5 billion PMA maturities is expected on Wednesday while OMO maturities of N107.4 billion is expected on Thursday. Traders say they expect yields to close higher this week on the maturities, in spite of the expected mop up by the CBN.