The currency market, on Monday, August 29, recorded $327 million worth of trades, about six times more than its usual volume, as foreign investors swooped on FGN bonds, the Central Bank of Nigeria, CBN.
The transaction from investors included a single $270 million deal at N345 per dollar, by foreign investors buying local currency bonds, Bola Onadele, the managing director of FMDQ OTC Securities Exchange, told Reuters. Other transactions were carried out from N314.50 to N317.34 per dollar.
Average trading is around $50 million on normal days. It might reach $100 million on days the central bank intervenes in the currency market.
Onadele explained that average trading is around $50 million a day on normal days and might reach $100 million on days the CBN intervenes in the currency market.
Traders also said the CBN sold an undisclosed amount of dollars, close to the end of market session, to help prop up the naira. The currency closed at N305.50, around the level where it’s closed for the past week.
Yesterday’s surge in trading came after the CBN said it will offer N212.85 billion in treasury bills maturing between 91 days and one year tomorrow. The debt would be sold tomorrow.
The bank has been selling short-dated open market bills at yields as high as 18 per cent in an effort to attract offshore funds, most of who fled Nigeria’s bond and equity markets during a financial crisis that began when oil prices plunged.
The Managing Director, Afrinvest Nigeria Limited, Ike Chioke said the downtrend in growth of the economy which began in late 2014 due to falling oil prices, has persisted into this year as foreign exchange (forex) market illiquidity, downtime in power supply and depressed real consumer income continue to weigh on productivity, investment and consumer spending.
“Developments in the forex market, which has seen the naira depreciate significantly against a host of foreign currencies, as well as increases in power and fuel tariffs have had passed through on consumer prices with Inflation rate in June 2016 far above the CBN’s allowable band of six to nine per cent and an eight – year high of 16.5 per cent from 9.6 per cent in January.
Ahead of tomorrow’s data release, Chioke said in the first quarter, GDP contracted 0.4 per cent Year-on-Year (Y-o-Y) as both oil (-1.9 per cent) and non-oil (-0.2 per cent) sectors contracted.
The services sector, which held aggregate growth all through last year as the industrial sector entered a recession, recorded its worst quarterly performance with a minimal 0.8 per cent Y-o-Y expansion relative to 4.7 per cent Y-o-Y growth in similar period of 2015, while industrial sector contracted 5.5 per cent Y-o-Y and agricultural sector grew 3.1 per cent Y-o-Y.
