FX Market: Fresh Optimism Buoys Rebound in Oil Prices

Recently, OPEC and its allies reiterated the need to ensure that proactive and preemptive measures are taken to support the oil market. Consequently, Brent rebounded to $43.21/bbl. from last week’s close of $40.65/bbl. despite rising COVID-19 cases. Locally, the external reserves remained pressured as it decreased 5bps w/w to $35.7bn (10/07/2020). 

At the official window, the CBN spot rate remained unchanged at ₦379.00/US$1.00 while the parallel market rate strengthened by ₦8.00 w/w to ₦457.00/US$1.00. The NAFEX rate depreciated 83kobo w/w at the Investors & Exporters (I&E) Window to close at ₦385.83/US$1.00. Furthermore, weekly turnover at the I & E window slipped 36.4% w/w to $329.2m from the $517.5m recorded in the previous week.

The aggregate value of the open contracts at the FMDQ Securities Exchange FX Futures Contract segment improved by 0.6% ($66.4m) w/w and settled at $11.2bn. The DEC 2020 instrument (contract price: ₦394.55) recorded the strongest demand with an additional subscription worth $20.4m, putting the total value at $2.1bn. Meanwhile, the MAY 2021 (contract price: ₦408.74) and AUG 2021 (contract price: ₦417.25) instruments recorded $1.00m additional subscription apiece, bringing their respective values to $692.84m and $239.63m. In the coming week, we expect the naira to remain relatively stable across the board.