Moderate rates, naira appreciation expected

AS Nigeria’s money market resumes trading today after a two-day public holiday to mark Muslim festival of Eid-al-Fitr, there are expectations that interbank rates will continue a downward trend, just as it is expected that the naira will strengthen at the alternative market segments.

Dealers said maturing treasury bills worth N236.118 billion will contribute in boosting liquidity in the money market and sustain the downward movement of interbank rates which started last week.

Meanwhile, the naira gained ground against the U.S. dollar at the Parallel market segment last week by 0.54 per cent to N368/USD. The local currency also appreciated at Investors & Exporters Forex Window (I&E FXW) by 0.86per cent to N362.16/USD. However, the Bureau De Change market segment experienced slight depreciation by 0.27 per cent to N365/USD.

Dealers from Cowry Assets Management Limited believe that the local currency will record appreciation in the alternative market segments subject to the level of intervention by the Central Bank of Nigeria this week.

In the same vein, the interbank rate eased to around eight percent on Friday from 15 percent last week after the central bank repaid N152.6 billion  ($500.57 million) in matured debt and paid refunds to banks for their foreign exchange (forex) cash provisions.

Traders said they also expect a further drop in the overnight rate to around five per cent in the next few days if the government, as expected, releases its May budget allocations this week to its agencies.

“We expect financial system liquidity ease and resultant moderation in interbank rates. We are anticipating additional cash flow from budgetary allocations to government agencies,” one dealer said.

The country’s distributable revenues rose to N462.4 billion in May, up from N415.7 billion the previous month, due to higher proceeds from corporate taxes, a government statement said late on Thursday.