Nigeria’s financial market liquidity is expected to improve following maturing Government instruments worth N481.02 billion expected to hit the market this week.
A breakdown of the expected inflows show that N283.42 billion would be maturing from Open Market Operation (OMO) and N197.6 billion from the Nigerian treasury bills (NT-bills) across the 91-, 182- and 364-day tenors at the Primary Market Auction on Wednesday.
Consequently, yields in the secondary market are to remain subdued due to improved system liquidity, which stood at N420.1bn as of Friday.
“We maintain that investors take advantage of the more attractive instruments along the yield curve along with possible commercial paper offerings,” analysts at Afrinvest Securities Limited said.
Last week, the Nigerian Treasury Bills secondary market traded on mixed sentiments, as market players traded calmly due to the pressured liquidity levels at N88.0bn at the start of the week. Although this was sustained as the week progressed, pocket-sized demand-driven activity was however witnessed on the longer-end of the curve as its average yield fell 70bps Week-on-Week to 2.1% from 2.8% the previous week.
Consequently, the average yield across all tenors declined 7bps W-o-W to settle at 1.5% from 1.6% the previous week. Particularly, the most demand was witnessed at the long-dated maturities including the 29-Apr-21 and 13-May-21 bills that contracted 77bps and 71bps W-o-W respectively.
At the foreign exchange market, Naira was stable across market segments on Tuesday as the dollar was trading at N476 and N477 on the black market and retail Bureau.
The FX market opened on Tuesday with an indicative rate of N385.64k, which signaled an appreciation of N0.74k when compared with N386.38k opened with on Monday at the Investors and Exporters (I&E) forex window, data from FMDQ revealed.
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Naira closed flat at N386.00 per dollar on Monday. Analysts at FSDH Research said most participants maintained bids between N384 and N386.00 per dollar.
The foreign exchange daily turnover declined by 87.87 percent to $7.20 million on Monday from $59.34 million recorded on Friday last week.
Last week, the CBN’s FX reserves fell by $12.29 million to $35.61 billion as FX outflows continue to outpace inflows. FX reserves have consistently declined since May 2020, a report by FSDH research
stated.
The FGN bonds market opened the week to the news of negative growth for Nigeria’s GDP (-6.10% YoY). This compounded an already weak market, still reeling from the previous week’s primary auction, according to a report by Zedcrest Capital Limited.
The firm noted offers across the benchmark curve all session, but with no matching bids as investors continue to sit on the sidelines. Even offers at the long-end at 10.00% levels were not seen as enticing enough to bring client demand. Consequently, yields expanded by c.25bps on the average across the bond curve.
“We remain cautious to label the current market weakness as bearish as we expect demand from local investors to improve in the coming weeks as their liquidity positions improve from OMO maturities and FGN Bond coupon payments start rolling in,” analysts at Zedcrest said.
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