- Naira skids as Dollar scarcity bites harder at FX market
BY BAMIDELE FAMOOFO
The bulls took dominance of the local bourse last week, edging higher by 1.51% w/w to 52,973.88 points as growing optimism among market players waxed stronger ahead of the swearing-in of a new administration while the current level of market volatility provides entry opportunity for core investors.
This is despite the recently published Q1 2023 economic performance, interest rate hike by the CBN and rates decline at the latest Nigerian Treasury Bills auction.
Also, the market cap of listed equities advanced by 1.51 percent w/w to N28.84 trillion while the year-to-date return of the market rose at 3.36 percent as equity investors amassed N428 billion in four out of five sessions.
Across all sectors, it was a bullish outing last week as the industrial Goods index emerged as the worst performing index with 0.70 percent loss w/w due to negative price movements in BUACEMENT and MULTIVERSE.
On the positive side, the Banking index was the leading gainer last week with 5.63 percent w/w gain as some company-related parties and deep-pocketers sustained their buying interests in the sector. This was trailed by the Insurance (+3.59%), Oil & Gas (+3.24%) and the Consumer Goods (+3.10%) sectors which reported positive price movements across the small, mid and large cap counters.
Meanwhile, market investors’ sentiment was largely bullish as the level of trading activities last week inched 4.5 percent w/w to 30,827 deals.
Also, the average traded volume last week plunged further into a negative territory by 35.2 percent to 1.96 billion units while the average weekly value moved northward by 93.30 percent w/w to N33.89 billion.
At the end of the week, FTNCOCOA (+55%), RTBRISCOE (+41%) and CHAMS (+37%) were the leading gainers for the week while SOVRENINS (-20%), ARDOVA (-14%) and BUACEMENT (-2%) led the laggards’ chart for the week.
Cowry Research anticipates the current bull trend to be sustained on profit-taking and portfolio rebalancing this week, even as investors digest the latest macroeconomic data and recent CBN’s interest rates decision even as Nigeria transitions into a new administration.
“Also, we expect the current level of market liquidity to be supported by dividend reinvestments by core investors in the midst of markdown dates and expected March year end audited accounts,” the analysts said.
Meanwhile, demand pressure in the foreign exchange market is on an upward trajectory as foreign exchange users such as manufacturers, importers, students and travellers begin their prowl for alternative sources.
Forex traders, according to sources close to the market, have also continued hoarding the dollar while some deposit money banks stifle the availability of the Naira to Nigerians.
Consequently, the Naira traded in a weakened sentiment as it depreciated by N12 or 1.59% w/w to N767/$1 from N755/$1 at the parallel market due to lingering scarcity of the greenback.
Also, at the investors’ and exporters’ FX window, the Naira depreciated further against the United States’ dollar by N1.51 or 0.33 percent week on week to close at N464.51/$1 from N463/$1 in the previous week as the hegemony of the dollar continues while players in the market kept bids between N463 and N470.
At the Interbank Foreign Exchange Forward Contracts market, the spot exchange rate remained unchanged, closing at N462/$1.
Also, in an analysis of the Naira/USD exchange rate at the weekly Naira FX Forward Contracts Markets, the Naira reigned with positive appreciations across all forward contracts tenor. Consequently, the naira strengthened by +1.45 percent, +4.29 percent, +6.22 percent, +9.15 percent and +6.27 percent w/w to close at N470.76/$1, N478.91/$1, N485.78/$1, N506.61/$1 and N538.72/$1 at all tenor contracts respectively.
In the oil market last week, oil prices embarked on a retreat on Friday following comments from the two biggest members of OPEC+ after it jumped earlier in the week from the announcement by the Saudi Energy Minister on a probable cut in production.
Thus, Brent Crude traded at $76.81 per barrel on the back of positive US debt ceiling talks.
However, on the home front, the Bonny Light crude price regained its positive weekly gains by 5.40% or ($4.14) w/w, to close at $80.80 per barrel from $76.66 per barrel in the previous week.
This week, experts expect the naira to trade in a relatively calm band across various market segments barring any market distortion and as the Central Bank of Nigeria continues its weekly FX market intervention to defend the value of the naira.
