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Naira Falls On Strong Demand After Holiday

The naira on Monday depreciated in value against the dollar after the two-day holiday due to strong demand by importers as well as huge naira cash outside the banking system.
Consequently, naira on Monday weakened by N1 or 0.45 percent at the Bureau de Change (BDC) segment of the foreign exchange market and N2 or 0.89 percent at the parallel market, BusinessDay survey reveals.
After trading on Monday, the local currency closed at N222/$ compared with N221/$ on Wednesday last week at the BDC segment. It closed at N224.50k/$ or 0.89 percent on same day as against N222.50k/$ last week Wednesday.
Aminu Gwadabe, acting president, Association of Bureau De Change Operation of Nigeria (ABCON), said that a lot of importers were placing order to ensure that they bring in goods before the festive season and that had helped fuel demand for the greenback.
Analysts in the financial services sector had expected resurgent demand and corresponding pressure on the local currency on resumption of normal economic activities after the two-day holiday.
However, naira on Monday still maintain its stability at the inter-bank foreign exchange market, closing at N199.05k/$ for eight consecutive days.
At the fixed income market, average change in NIBOR pegged at -3.07 percent, as the Call Rate, 1Month, 3Months and 6Months tenor rates close the day at 5.63% (-8.38%), 14.41% (-1.35%), 15.70% (-1.21%) and 16.72 percent (-1.34%) respectively. Similarly, Open Buy-Back (OBB) and Overnight (OVN) rates declined by 6.42 percent and 6.09 percent to peg at 5.08 percent and 5.83 percent, respectively.
According to analysts at Meristem Securities Limited, investors’ sentiments moved in favour of Treasury Bill instruments, especially the shorter termed instruments with yields for the 1Month, 2Months and 3Months instruments recording the highest decline. Yield declined by 1.83 percent, 1.51 percent, 1.76 percent, 0.07 percent, 0.50 percent and 0.54 percent for the 1Month, 2Months, 3Months, 6Months and 12Months instruments respectively.
The trend continued at the shorter end of the yield curve in the Bonds space, with offer yields declining across most tenors save for the longer-term instruments. The 23-JUL-2030, 28-NOV-2028, 22-MAY-2029 and 20-NOV-2029 instruments closed with offer yields advancing by 0.05 percent, 0.01 percent, 0.06 percent and 0.06 percent accordingly. Offer yields for the Benchmark and Off-the-run bond instruments pegged at an average of 14.64 percent and 15.25 percent, respectively.

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