Nigeria’s Central Bank within the week, debited a total of N600 billion from banks for breaching its Cash Reserves Requirements (CRR).
This, in addition to absence of inflows resulted in money market ending the week with tight liquidity which declined by 71.63 percent to N220.7 billion from N778.0 billion at the beginning of the week.
“As a result of the tight system liquidity towards the end of the week, the CBN did not conduct any auction this week. However, given the apex bank’s management of system liquidity, we expect money market rates to trade at a similar band in the coming week despite maturing T-bills and OMO instruments worth N56.7bn and N89.0m respectively,” analysts at Afrinvest Securities Limited said.
The Open Buy-back Back (OBB), a money market instrument used to raise short term capital and Overnight (OVN) rates, a rate that a bank used to lend or borrow money from another bank, closed at 6.3% and 7.2% respectively at the end of the week.
A report by Afrinvest showed that OBB and OVN rates opened the week higher at 13.3% and 14.3% respectively, although system liquidity rose slightly to N778.0bn (vs. N769.2bn as at 29/07/2020). However, both the OBB and OVN rates declined to 8.5% and 9.3% respectively on Wednesday while system liquidity plunged to N195.8bn.
In the secondary T-bills market, bearish momentum resurfaced as average yield closed higher by 6bps week/week to 2.0%. While the yield at the longer end was flat at 2.9%, the short-term instrument recorded a mild gain as yield moderated 1bp w/w to 1.2%. On the other hand, there were sell-offs in the medium-term instrument with average yield climbing 18bps w/w to 2.0%.
Cowry Asset Management Limitd revealed that the Standing Standing Deposit Facility (SDF) worth N117.02 billion outweighed the Standing Lending Facility (SLF) worth N10.26 billion – indicative of financial system liquidity ease as deposit money banks deposited more money with CBN than they borrowed from it. Hence, given the financial system liquidity boost, NIBOR for 3 months and 6 months tenor buckets moderated to 4.44% (from 4.65%) and 4.69% (from 5.27%) respectively.
At the foreign exchange market, Naira remained stable at N473 and N475 per dollar on the black market and retail Bureau segment respectively.
The foreign exchange daily turnover at the Investors and Exporters (I&E) declined by 13.54 percent to $92.22 million on Friday from $106.66 million recorded on Thursday, data from FMDQ indicated.
Consequently, Naira weakened by 0.13 percent as the dollar was quoted at N386.00 as compared to N385.50 on the previous day.
Analysts at FSDH research said most participants maintained bids between N383.75 and N393.05 per dollar.
The external reserves maintained its downtrend this week, declining 0.6% w/w to $35.7bn (8/6/2020) as the apex bank continued its weekly FX intervention sales. On the global front, Oil prices rose, up 2.2% w/w to $44.5/bbl. even as the OPEC+ eased daily oil production cut to 7.7m barrels from 9.7m barrels, a report by Afrinvest stated.
The total value of open contracts of the naira at the FMDQ Securities Exchange (SE) FX Futures Contract Market increased 1.9% w/w ($30.3m) to $12.9bn. The SEPT 2020 instrument (contract price: N394.67) received the highest subscription of $17.1m which took total value to $1.2bn. On the other hand, the JAN 2021 instrument (contract price: N405.52) recorded the least subscription of $1.7m with a total value of $1.2bn.
“We expect exchange rates to remain range-bound across the different segments of the market in the coming week,” Afrinvest analysts said.
At the bond market, the report noted that following successive weeks of stellar demand, profit-taking in the secondary market forced trading to close the week bearish. As a result, average yield spiked 73bps w/w to 7.6% following sell-offs on 4 of 5 trading sessions. Across tenors, the long-term notes recorded the most sell pressures with yields rising 112bps w/w. Similarly, the mid and short-term instruments recorded 82bps and 11bps rise in yields respectively.
