The naira closed the week at N1,373.25 per dollar in the official foreign exchange market, marking a 0.16 percent appreciation as external reserves increased by 0.57 percent to $49.26 billion. This development signals a continued consolidation of rate convergence across market segments.
Parallel Market and Oil Prices
In the parallel market, the local currency weakened slightly, depreciating by about 15 basis points to trade around N1,372 per dollar. The foreign exchange market recorded mixed performance during the week, with rising reserves providing support for the naira despite ongoing liquidity challenges and demand pressures.
In global oil markets, Brent crude futures traded largely flat at $93.84 per barrel early on Friday, while West Texas Intermediate crude slipped by 0.12 percent to $88.94 per barrel. Later in the session, Brent fell by 1.74 percent to $92.08 per barrel, and WTI declined by 1.52 percent to $87.55 per barrel. Analysts attributed the recent weakness in oil prices to market adjustments following April's sharp rally driven by supply disruptions.
Naira Outlook
Analysts project that the naira will likely maintain a mixed trend in the near term, supported by stronger external reserves but constrained by foreign exchange demand and liquidity shortages. While the official market is expected to remain relatively stable, the parallel market may continue to experience volatility due to unpredictable dollar supply.
Money Market Liquidity
Liquidity conditions in the money market remained strong throughout the week. System liquidity opened at N3.84 trillion on Monday, recovering from the preceding Friday's post-open market operations auction level of N2.79 trillion, and later rose to N6.02 trillion at the close of the week. The increase was largely driven by higher placements at the Central Bank of Nigeria's standing deposit facility, reflecting reduced borrowing needs and lower funding pressures.
A major boost came on Tuesday when N1.97 trillion in OMO instruments matured, pushing system liquidity sharply higher to N5.92 trillion. Despite the significant liquidity injection, interbank rates remained stable. The open repo rate closed at 22 percent, while the overnight rate remained unchanged at 22.19 percent throughout the week, indicating comfortable liquidity conditions.
Interest Rate Movements
The Nigerian Interbank Offered Rate recorded mixed movements but generally declined across longer tenors. Overnight NIBOR remained unchanged at 22.25 percent, while the one-month, three-month, and six-month tenors fell by 17, 70, and 88 basis points respectively to 22.65 percent, 22.97 percent, and 23.28 percent.
Similarly, the Nigerian Treasury Bill True Yield curve traded mixed. The one-month and three-month tenors increased by 24 and 16 basis points to 16.04 percent and 16.53 percent, respectively. However, the six-month and 12-month tenors declined by 13 and eight basis points to 17.19 percent and 18.85 percent.
Treasury Bills Market
Trading in the secondary treasury bills market remained moderately active despite the shortened trading week. Strong investor demand, supported by abundant liquidity, pulled average benchmark yields down by six basis points week-on-week to 17.51 percent.
At the OMO auction held on May 29, investor appetite remained strong, particularly for the 102-day instrument, which attracted subscriptions valued at N1.73 trillion against an offer size of N200 billion. The CBN eventually allotted N1.72 trillion at a stop rate of 20.37 percent. The 11-day instrument also attracted significant demand, recording subscriptions of N225 billion and sales of N220 billion at a stop rate of 21.8 percent, highlighting investors' preference for short-term instruments. In contrast, the 39-day tenor received subscriptions of N588 billion but recorded no sales, suggesting that the apex bank rejected bids due to pricing concerns.
Future Outlook
Looking ahead, analysts expect liquidity conditions to remain robust as the market enters a new month. Expected inflows include about N2.72 trillion from OMO maturities and N631.46 billion from Nigerian Treasury Bill maturities, bringing total inflows to approximately N3.35 trillion.
