Inter-bank liquidity squeezed to N38bn

Nigeria’s inter-bank liquidity fell further to N38 billion on Tuesday from N445.0 billion on Friday last week due to the absence of any major inflows in the market, reports from financial market dealers said.

Consequently, the Open Repo (OPR) increased by 0.25 percent to close at 14.00 percent on Tuesday as against the last close of 13.75 percent on Monday. However, the Overnight (O/N) rate remained unchanged at 14.00 percent.

System liquidity rose to N445.0bn as of Friday due to about N300 billion settlements for retail inter-bank retail Secondary Market Intervention Sales (SMIS) auction on Friday.

“In the absence of any major inflow this week, we expect yields to rise further notwithstanding the NT-Bills maturities worth N174.09 billion on Thursday which will be rolled over. Thus, we advise investors to trade cautiously prior to the outcome of the Primary Market Auction (PMA) and take advantage of attractive bills across the curve along with offers from corporates,” analysts at Afrinvest Securities Limited said.

“We expect rates to decline upon receipt of Federation Account Allocation Committee (FAAC) payments,” analysts at Parthian Partners Limited said in a report.

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Last week, FAAC shared a total of N680.783 billion being May 2022 revenue to the federal, the 36 states and 774 local government areas of the country.

The Treasury bill market had a calm session on Tuesday, as players took a cautious stance ahead of the NTB auction scheduled for Wednesday (today).

Yields, however, expanded by 8bps on average amid sell interests across the curve, driven by the persistent liquidity squeeze, the analysts said.

“We expect a quiet session today (Wednesday) as participants await the outcome of the auction,” the analysts said.

In the foreign exchange market, naira depreciated by 0.12 percent as the dollar was quoted at N421.50 on Tuesday as against the last close of N421.00 on Monday at the Investors and Exporters (I&E) forex window. Most currency dealers who participated in the auction maintained bids between N413.00 (low) and N444.00 (high) per dollar.

Foreign exchange sales at the I&E and the Small and Medium Enterprise (SME) windows, and the interbank segment fell by 49.0 percent, 37.9 percent and 44.8 percent to US$0.29 billion, US$0.09 billion, and US$0.1 billion, respectively, in February 2022, the CBN said in its economic report for the month of February 2022.

According to the report, the naira exchange rate at the I&E window remained relatively stable in the review period despite the upscaling of cyclical and structural demand factors amidst foreign exchange supply constraints. The average exchange rate of the naira per US dollar at the I&E window depreciated by 0.22 percent to N416.95/US$, in February 2022, compared with N416.03/US$ in the previous month.

Naira exchanges with the dollar at N615/$ on Wednesday at the unofficial market popularly called the black market. With the current rate, the naira has lost 8.85 percent of its value since the beginning of the year when it exchanged at N565 with the dollar in the parallel market.

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