The financial market will experience some liquidity squeeze as the Central Bank of Nigeria (CBN) will mop-up the sum of N606 billion maturing Treasury Bills from the financial market with week.
The money market last week recorded an inflow of N472.4 billion emanating from maturing Open Market Operation (OMO) bills, which resulted in the decline of money market rates.
Overnight inter-bank rate, which is the rate at which Deposit Money Banks (DMBs) borrow and lend to each other, declined on Friday by 6.2 1percent to close at 3.43 as compared to 9.64 percent.
Also, the Open Buy-Back (OBB), the money market instrument used to raise short term capital, declined by 5.86 percent to close at 2.71 percent as against 8.57 percent on the previous day.
“We expect the rates to rise in anticipation of OMO auction next week, owing to an inflow of maturing bills worth N606 billion,” analysts at FSDH Merchant Bank Limited said.
The CBN sold N11.52 trillion treasury bills through the OMO in the last nine months, to mop up liquidity from the system as a strategy for monetary management.
According to the analysts, the treasury bills market closed on a positive note on Friday, and buying interest was witnessed across the yield curve. Average yields across the curve declined by 14 basis points to 13.25 percent from 13.39 percent on the previous day. Yields on the short, medium and long term maturities fell by 8bps, 27bps, and 10bps respectively.
on Friday October 4, 2019, made an intervention of $311.5million in the retail Secondary Market Intervention Sales (SMIS) and CNY 15million in the spot and short-tenored forwards segment of the inter-bank foreign market.
Isaac Okorafor, director, corporate communications department at the CBN confirmed the latest injection, disclosing that “the dollar interventions were for customers in the agricultural, airlines, petroleum products and raw materials and machinery sectors, while the yuan component was for payment of renminbi-denominated letters of credit for agriculture as well as raw materials”.
Read Also: CBN’s LDR victory lap may be too soon
Okorafor further said that the market continued to enjoy stability, owing to the regular interventions by the Bank, which he said has also guaranteed a stable exchange rate for the Naira. He assured that the Bank’s Management would remain committed to ensuring that all the sectors of the forex market continue to enjoy access to the needed foreign exchange.
Meanwhile, $1 exchanged for N357 at the Bureau de Change (BDC) segment of the foreign exchange market, while CNY1 exchanged at N47.
The regulator sold a total of US$8,287.52 million at the foreign exchange market in the first half of 2019, according to the CBN’s half year activity report.
This comprised US$2,142.63 million at the Inter-bank spot, US$550.70 million for Invisibles, US$810.00 million for SMEs, US$212.11 million at the I&E window and US$4,572.03 million as Forwards sales. On the other hand, the Bank purchased US$9,368.92 million at the inter-bank segment, hence a net purchase of US$1,081.40 million by the Bank. At the Forwards segment, the sum of US$4,979.46 million matured, while US$2,552.01 million was outstanding at end-June 2019.
In the corresponding period of 2018, US$9,499.91 million was sold at the Inter-bank segment, comprising US$1,546.43 million at the Inter-bank spot, US$768.70 million for Invisibles, US$637.00 million for SMEs, US$1,236.69 million at the I & E window and $5,311.09 million as Forwards sales. The Bank purchased US$6,436.47 million at the inter-bank segment, resulting in a net sale of US$3,063.44 million.
The sum of US$5,681.77 million matured at the Forwards segment, while US$1,469.04 million was outstanding at end-June 2018.
