Oil majors’ FX sale, FAAC fund to boost naira, moderate inter-bank rates

Banks’ system liquidity resulting from treasury bills maturity worth N198.13 billion, Federation Accounts Allocation Committee (FAAC) funds worth about N630.30 billion and oil majors sell of foreign currency to lenders are expected to boost naira and moderate inter-bank rates this week.

Consequently, the local currency is expected to appreciate further at the inter-bank market segment as oil majors sell foreign currency to lenders in or der to meet their month end obligations. Inter-bank rates are expected to fall amid expected boost in financial system liquidity as treasury bills worth N198.13 billion will mature via Open Market Operations on Thursday, August 28, 2014. This is in addition to the lingering impact of Federation Accounts Allocation Committee (FAAC) inflow, according to a report by Cowry Asset Management Limited.

Last week, the central bank offered USD700 million but sold a total of USD699.68 million (or N108.96 billion) to end users at the Retail Dutch Auction (RDAS), a marginal decline of 4.25 percent below the USD730.78 million sold in the preceding week.

onsequently, the USD/naira rate held steady at N155.73/$1 at the official window. Meanwhile, the local currency appreciated by 0.26 percent (N0.43) to N162.11/$1 at the interbank market, amid dollar sales of undisclosed sums by Nigerian National Petroleum Corporation (NNPC). At other alternative market segments, the local currency appreciated by 0.29 percent to N170.50/$1 at the bureau de change market. It also gained value at the parallel market by 0.58% (N1.00) to N171.50/$1.

Also last week, the Nigerian Inter-Bank Offer Rates (NIBOR) mellowed across the board on FAAC inflow. In the week under review, CBN auctioned treasury bills worth N70.65 billion via the primary market, viz: 91-day bills worth N40.65 billion and 182-day bills worth N30.00 billion.

However, an equivalent amount of treasury bills of similar tenors matured, via the primary market. Additional 147-day bills worth N146.37 billion matured via Open Market Operations. In addition, FAAC disbursed funds worth about N630.30 billion to the three tiers of government.