THE official foreign exchange (forex) market recorded approximately $472.75 million increased turnover in eight days from $83.5 million on May 17 to $556.25 million on May 24, 2024.
Dollar supplied by willing sellers and willing buyers including commercial banks rose significantly by 231.99 percent to $556.25 million on Friday from $167.55 million recorded on Thursday.
The last time the forex market recorded an increase in dollar supply was on March 28, 2024 when it jumped to $857.78 million.
After trading on Friday, the naira gained slightly by 0.19 percent as the dollar was quoted at the rate of N1,482.81 compared to N1,485.66 quoted on Thursday at the Nigerian Autonomous Foreign Exchange Market (NAFEM), according to the data from the FMDQ Securities Exchange Limited.
Some market watchers attributed the rise in forex turnover to increased interest of foreign investors after the Monetary Policy Committee (MPC) hiked the benchmark interest rate.
Before the MPC meeting last week, the official forex market experienced a significant drop in turnover between Thursday, May 16 and Friday, May 17, 2024, recording a steep 69.4 percent decline.
Specifically, on Thursday May 16, the forex turnover stood at $272.86 million, indicating a robust trading day with substantial market activity.
However, this figure drastically fell to $83.5 million on Friday, May 17 2024 highlighting a stark contrast in the volume of transactions within just a 24-hour period.
This was the lowest turnover rate since January 20, 2024 but received a boost to the tune of $556.25 million May 24, 2024 Forex transaction data from FMDQ showed.
Although market analysts note that Foreign investors are staging a comeback for government securities following a hike in benchmark interest rates and reforms led by Nigeria’s Central Bank, by comparison Commercio Partners, a Lagos-based investment advisory firm confirmed that at the closing bell, the Nigerian stock market experienced a disappointing week, marked by a 52 basis points (bps) dip week on week (WoW) and a 37bps decline day-on-day in the benchmark All-Share index, concluding at 97,612.51 points.
“Taking a more granular view, market cap declined by ₦0.20 trillion to ₦55.23 trillion while the year-to-date return settled at 30.54 percent. This negative trajectory was largely influenced by the price declines in the banking names, particularly Ecobank Transnational Inc. (ETI) (-9.98%), UBA (-4.00%), Zenith Bank (-2.76%), and FBNH (-9.31%).
“In reflection of market stance, market breadth concluded at 0.47x which shows that 51 decliners outnumbered 24 advancers, “ the firm stated in an emailed note to clients.
The Federal Government of Nigeria (FGN) local bond Market traded on a muted note throughout last week.
Activity was skewed to the new 2033 bond bid at 20.00 percent and offered at 19.91 percent.
At the end of the MPC meeting, the committee voted to raise the Monetary Policy Rate (MPR) by 150bps to 26.25 percent from 24.75% while holding other parameters constant.
Market data showed the new 10-year bond traded at 19.89 percent on the bid and 19.74 percent on the offer. In addition, there were few cares on the long end of the curve, particularly the off the run 29-year bond with bids at 17.57 percent and the 2049s bid at 17.95 percent while offers were far at 17.65 percent. WoW, the average benchmark yields slid 2bps, settling at 18.55 percent.
The Central Bank has consecutively raised interest rates sharply to a 10-year high, in an aggressive move to contain stubborn inflation. At the previous rate hike meeting, CBN governor, Olayemi Cardoso hinted that the MPC would keep raising the rates in hopes that inflation moderates below 30 percent.
The continuous rate hike has attracted more investors while hurting lending to smaller businesses.
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