The Nigerian inter-bank rates are expected to remain moderate as the Treasury bills worth N76.22 billion will mature via Open Market Operation (OMO) this week.
The overnight inter-bank rate, which is the rate at which Deposit Money Banks (DMBs) borrow and lend to each other, declined by 0.60 percent to close at 5.30 percent on Friday from 5.90 percent the previous day.
Also, the Open Buy-Back (OBB), the money market instrument used to raise short term capital, declined by 0.40 percent to close at 4.80 percent on Friday from 5.20 percent the previous day.
“We expect interbank rates to moderate amid anticipated boost in financial system liquidity,” analysts at Cowry Asset Management Limited said.
The Central Bank of Nigeria (CBN) last week refinanced matured T-bills worth N65.56 billion via Primary market at lower rates for all maturities; stop rate for the 91-day bill fell to 2.30 percent (from 2.49%), the 182-day bill decreased to 3.40 percent (from 3.78%) and the 364-day bill fell to 4.60 percent (from 5.30%) respectively. N344.50 billion worth of treasury bills matured via OMO which, combined with the primary market maturities (N65.56 billion), resulted in total inflows worth N410.12 billion.
In the OMO market on Friday the average OMO yields declined by 9 basis points (bps) to 16.49 percent as against 16.58 on Thursday.
Buying interest was witnessed across long-term maturities, with the average yield compressing by 30bps. However, average yields across short-term and medium-term maturities increased by 9 bps and 30 bps respectively.
Yields on 33 bills fell with the 26-Jan-21 maturity bill recording the highest yield decline of 275 bps, while yields on three bills advanced with the 27-Aug-20 maturity bill registering the highest yield increase of 247 bps.
The CBN offered a total of N150 billion to investors the three tenors comprising of N130 billion for 362-day, N10 billion each for 180-day and 98-day tenors but there was no sales.
While there was no interest in the short term OMO bill, investors subscribed to the medium and long term bills to the tune of N2 billion and N16 billion respectively.
The bid at a range of 17-18.25 percent for the long term bill and 16 percent for the medium-term bill but the OMO auction result obtained by BusinessDay showed no sales.
Ayodele Akinwunmi, relationship manager, corporate banking, FSDH Merchant Bank Limited, said the bid rates the market participants wanted to buy the OMO were high.
“And I suspect the CBN thought there was no justification for such high rates. Therefore there was no sale. Remember that it is the CBN that pays for the cost of managing the liquidity using the OMO as an instrument. In the last few days the rate at the secondary market has increased,” he said.
Akintunde Olusegun, financial market analyst at Polaris Bank Limited, said the level of subscription on the mid and long tenor was abysmally low while the range of bid was also very high.
He opined that the CBN might have been uncomfortable with both parameters. Total subscription on the 182-days bill was N2 billion against N10 billion that was offered while the total subscription on the 362 days bill was N16 billion against N130 billion that was offered. There was no subscription on the shorter tenor. The low level of subscription is a result of lack of interest on the part of the FPIs. The current economy realities and secondary market rates was priced into the range of bids submitted by the few investors that bid. The sudden increase in rate at the secondary market was due to sell-off by Foreign Portfolio Investors (FPIs) who are running to safety on the back of the continued fall in oil price and the impact of coronavirus on global economy.
At the foreign exchange market, dollar closes at N380 after trading on Friday in some parts of Lagos black market. This represents N3 loss compare to N375 traded in the morning of the same day.
The depreciation in value of the naira was attributed to increased demand for dollar by end-users occasioned by speculation that the Chinese have resumed business and importers of finished goods are buying dollars to meet their needs.
“Since we heard that the Chinese have resumed, dollar started to go up,” one of the black market operators said. However, in some area like Apapa, Lagos, dollar closed stable at N377.
In its foreign exchange management policy, which commenced in 2016, the Central Bank of Nigeria (CBN) had restricted access to forex, to some 43 food and non-food items, that can be produced in the country.
At the Investors and Exporters (I&E) forex window, dollar was quoted at N372, losing N1.65kobo from N370.35/$ traded the previous day, data from FMDQ show.
On Thursday with dollar appreciated by 67 kobo to an average rate of N376 from N376.67k per dollar traded in the morning of same day at the black market.
The CBN on Friday moved the FX sales rate to Foreign Portfolio Investors (FPIs) to N380.2/$, from N366.7/$, in a move that suggests a technical devaluation of the naira, Bloomberg terminal reports.