Nigeria’s foreign exchange market has been subjected to severe pressure, leading to a significant depreciation of the Naira across all market segments. READ ALSO: FirstBank Set For Merger With Heritage And Polaris Banks
This development is coming on the heels of the Central Bank of Nigeria, CBN, indication that it would raise about N513 billion from sales of Nigerian Treasury Bills, NTB, in the second quarter of 2020.
The Naira suffered its biggest daily depreciation of N8.5 against the US dollar in the parallel market since 2017, as the exchange rate rose sharply to N367 per dollar from N358.5.
Since the Investors & Exporters (I&E) window was introduced in 2017, the exchange rate jumped to N368.33 per dollar from N366.75, losing N1.58; the biggest daily depreciation.
The development, according to market operators was triggered by the sudden jump in dollar demand as many traders anticipate foreign exchange scarcity following the crash in oil price, which implied a huge drop in foreign exchange inflow to the economy, amidst continuous fall in the nation’s external reserves.
Meanwhile, Brent Crude was plunging 3.4 per cent at $35.95, while WTI Crude was down 3.26 per cent at $33.24.
The President, Association of Bureaux De Change Operators of Nigeria, ABCON, Aminu Gwadabe, said: “The depreciation of the naira in the parallel market is a surprise because the Central Bank of Nigeria (CBN) has been selling dollars to BDCs. They still sold dollars to us today.”
Meanwhile, the Central Bank of Nigeria has announced that its NTB issuance programme for the second quarter would comprise N94.245 billion worth of 91-Days bills, N86.182 billion worth of 182-Days bills and N332.352 billion worth of 364-Days bills.
The NTBs represent rollover of an equal amount of bills that will mature during the period, according to the CBN.
The CBN, it was gathered, sells the National Treasury Bill, NTB, and Open Market Operation, OMO, bills, with the NTB issued to borrow from the public on behalf of the Federal Government while the OMO (Open Market Operations) bills are issued to mop up excess cash from the system.
Furthermore, the apex bank, last year, banned local investors from OMO auction, restricting participation to banks and Foreign Portfolio Investors, FPIs.
The move, however, triggered huge excess demand for NTBs resulting to crash in the yields on the instrument, with the yield on 364-Days NTB crashing to about five per cent last week from around 15 per cent in December 2019.