The rates at which deposit money banks borrow from each other, known as inter-bank rates are expected to rise this week following the plans by the Central Bank of Nigeria (CBN) to aggressively mop up liquidity from the system.
“We anticipate an uptrend in money market rates in the interim, however weekly FX provisioning and refunding will continue to bring about marginal swings in rates”, Ayodeji Ebo, head, investment research, Afrinvest Securities limited said.
Activities in the money market last week revealed that Open Buy-Back (OBB) and Overnight (ON) rates opened the week at 3.8% and 4.3% due to robust system liquidity. However, rates rose 2.5% and 2.3% to settle at 6.3% and 6.6% respectively on Tuesday as the CBN mopped up about N40.3bn from the system. OBB and ON rates however moderated to 3.8% and 4.4% on Wednesday as inflows from unfulfilled FX provisioning refunds by the CBN to the DMBs for the previous week hit the system.
Market liquidity stood at N923.8bn on Wednesday morning but reduced to about N405bn by market open on Thursday due to deposits made by DMBs for special FX intervention. OBB and ON rates closed the week down 0.7% apiece Week-On-Week to close at 3.1% and 3.6% at the end of Friday’s trading session.
At the foreign exchange market, analysts do not expect any sharp rates volatility to occur this week. Last week the foreign exchange market continues to enjoy relative stability as observed in recent weeks, though the spread between the official/interbank and the BDC/Parallel market rates remains staggering. However, consensus opinion remains that the current stability is artificial, bearing in mind the Apex Bank’s decision to remain mute on the policy direction of the foreign exchange market.
Consequently, accordingly, Naira/Dollar exchange rate at the CBN and interbank remained at N197.00/US$1 and N199.50/US$1.00 respectively. At the BDC segment, FX traded at N320/US$1.00 on all trading days of the week while Parallel market rate traded at N322/US$1 on all trading days save for Tuesday when it declined marginally to N323/US$1.00.
Activities in the bonds market was mixed last week. Average yields across benchmark bonds rose 4bps on Monday closing at 11.6%. Sell pressures drove yields 0.1% higher on Tuesday to settle at 11.7%. Activities were mostly observed on the FGN FEB2020 and FGN JUL2034 bonds. By mid-week, average yield across benchmark bonds moderated to 11.6% amidst huge system liquidity. There was increased activity on the FGN MAR2024 and FGN JAN2026 bonds. Average yield across benchmark bonds settled at 11.6% on Friday, down 4bps W-O-W.
