•CBN pumps $61m to defend naira
By Chinwendu Obienyi
Foreign Portfolio Investors (FPIs) ramped up their interest in Nigeria’s fixed income instruments last week, ahead of Monday’s federal government’s (FGN) bond auction, as bullish sentiment gripped the local bond and foreign exchange markets.
The Central Bank of Nigeria (CBN) also intervened with $61 million in dollar sales to banks, supporting a slight appreciation in the naira.
Latest data from FMDQ Exchange shows that total turnover in the FX Spot and Derivatives markets rose to $1.91 billion in the week ended June 20, 2025, an 8.82 per cent increase from the $1.75 billion recorded a week earlier. The increase was driven solely by FX Spot market activity, as the derivatives segment recorded zero transactions during the period.
The CBN’s spot market intervention helped stabilise the currency, while increased dollar inflows from FPIs particularly those seeking exposure to high-yield government securities helped improve liquidity. As a result, the naira appreciated by 0.6 per cent week-on-week (w/w) to N1,548.00/$1.
The foreign exchange forwards market mirrored this sentiment, with gains across short- and medium-tenor contracts. The 1-month and 3-month forward rates strengthened by 0.2 per cent and 0.4 per cent respectively, to close at N1,579.78/$1 and NGN1,636.90/$1. The 6-month rate closed flat, while the 1-year rate fell by 0.9 per cent to N1,904.50/$1.
Despite the relative stability, Nigeria’s gross external reserves continued to decline, slipping for the fourth consecutive week by $219.56 million to $37.71 billion as of June 19. Analysts attribute this trend to ongoing FX demand pressures and the CBN’s efforts to maintain exchange rate stability.
In the secondary bond market was upbeat, with strong buying interest pushing yields lower across the curve. The average yield on benchmark FGN bonds declined by 27 basis points (bps) to 18.6 per cent, amid robust demand from local institutional investors repositioning ahead of the upcoming auction.
Specifically, the short end of the curve saw the sharpest drop at -36bps, driven by interest in the MAR-2027 bond, which recorded a 60 bps decline. The mid and long segments also fell by 27 bps and 23 bps respectively, led by the MAR-2035 and JAN-2042 bonds—each shedding 57 bps.
Meanwhile, market attention will turn to the June 24 FGN bond auction, where the Debt Management Office (DMO) is scheduled to offer N100 billion in sovereign debt via the re-opening of the APR-2029 bond and a new issuance of the JUN-2032 bond.
“We expect marginal rates to trend lower at the auction, reflecting strong investor demand and the market’s expectation of a dovish monetary policy stance,” analysts at Cordros Research said.
With bond yields moderating and the naira finding footing amid geopolitical uncertainties, particularly rising tensions in the Middle East, analysts expect the CBN to continue targeted interventions to manage market sentiment.
“Despite external risks, the local bond and FX markets are showing resilience. The real test will be how well demand holds up after the auction, and whether monetary policy will align with market expectations”, they said.