Market News

The foreign exchange market yesterday witnessed a marginal depreciation in the value of the naira, as the official exchange rate weakened by three basis points (bps) to close at N1,465.00 per US dollar.

The slight weakening reflects continued pressures in the FX market amid sustained demand for foreign currencies by importers and portfolio investors.

In the money market, the overnight lending rate expanded by 49 basis points to 25.4 per cent, despite the absence of significant funding pressures in the financial system.

Market participants attributed the uptick to marginal liquidity adjustments by banks as they positioned ahead of midweek transactions and possible funding obligations.

Analysts noted that liquidity levels remained relatively stable, suggesting that the rise in overnight rates was more technical than systemic, reflecting the Central Bank’s cautious liquidity management stance.

Trading in the Treasury bills secondary market was largely quiet but maintained a bullish undertone, as the average yield dipped slightly by one basis point to 16.7 per cent.

The mild decline in yields was driven by renewed demand across short, mid, and long-dated maturities.

Across the curve, yields contracted by 1bp each at the short (-1bp), mid (-1bp), and long (-1bp) ends, supported by buying interest in the 79-day (-1bp), 156-day (-1bp), and 352-day (-1bp) bills, respectively.

Market dealers said investors continued to favor short-term instruments amid attractive yields and reduced supply pressures.

A similar trend was observed in the Open Market Operations (OMO) segment, where the average yield fell by 1bp to 21.6 per cent.

The marginal yield movement reflected moderate demand from institutional investors seeking to lock in short-duration papers at relatively high rates before a potential moderation in yields.

The Treasury bond secondary market extended its bullish momentum, as the average yield declined by 3 basis points to 15.8 per cent.

The rally was largely driven by strong demand for short-term bonds, particularly the APR-2029 maturity, whose yield compressed significantly by 51 basis points, reflecting robust investor appetite for near-dated instruments.

However, the mid-segment of the curve saw a mild upward adjustment, with yields expanding by 1bp due to profit taking on the JUN-2033 bond, which rose by 3bps.

The long end of the curve remained stable, suggesting a balanced sentiment among investors amid expectations of steady monetary policy direction from the Central Bank of Nigeria (CBN).

Market analysts expect trading activity across the fixed income segment to remain mixed in the near term as investors continue to weigh liquidity dynamics, inflation expectations, and upcoming monetary policy decisions.

The naira, meanwhile, is likely to trade within a narrow band in the short run, as market participants await further FX supply interventions from the CBN to support stability.