N259b maturing securities calm interbank rates
A rising trend in interest rates on lending among banks was reversed last week with improvement in the quantity of money in circulation arising from N259 billion worth of matured securities.
The maturing securities are made up of an Open Market Operations worth N151.1 billion and treasury bills put at N107.9 billion, which value hit the system.
Consequently, by middle of week, the two money market securities- Open Buy Back (OBB) and Overnight moderated 10 percentage point (ppts) and 10.2ppts to close at 20 per cent and 22.1 per cent from at 22.5 per cent and 25 per cent respectively.
The development was sustained until Friday, when both instruments were traded at 6.8 per cent and 8.1 per cent, 5.0ppts and 4.8ppts lower week-on-week respectively, among banks.
At the start of the week, OBB and OVN rates rose by 10.7ppts and 12.1ppts to settle at 22.5 per cent and 25.0 per cent respectively, as the impact of CBN’s OMO auction and weekly foreign exchange intervention offset the N87 billion bond coupon payment.
At the OMO auction, the CBN issued 101-day bill worth N50 billion; and 227-day paper worth N100 billion but sold N111.2 billion at 12.6 per cent and 14.4 per cent respectively.
The transaction, which mopped up the money in circulation, caused the OBB and Overnight rates to increase by 7.5ppts and 7.3ppts to 30.0 per cent and 32.3 per cent respectively, on Tuesday, as it opened with N45.1 billion.
Analysts at Afrinvest Securities Limited said in the coming week, about N140.01 billion of OMO bills will be maturing, which will further push down interbank lending rates.
Meanwhile, the local currency maintained resilience amid tight trade with other global currencies, as CBN continued its weekly interventions, injecting $210 million earlier in the week.
The apex bank also ended the week with another intervention, estimated at $339.89 million to meet demands in the Retail Secondary Market Intervention Sales (SMIS).
The intervention will clear the path for strong transactions by the Naira against other currencies in the early part of this week, as the nation’s reserves race towards a $47 billion mark.
Similarly, at the Investors’ and Exporters’ (I&E) window, the NAFEX rate opened at N360.16/$ last week and traded flat till mid-week before appreciating 13 kobo on Thursday to close at N360.03/$.
The activity level in the I&E window, however, weakened as cumulative weekly turnover measured stood at $839.3 million, down by 40.7 per cent ($576.7 million), from $1.4 billion recorded the same period of the previous week.
Analysts are optimistic that in the near term, exchange rates will continue to trade within tight bands, as investors remain confident of the apex bank’s ability to sustain its interventions, considering sustained increase in external reserves and strong autonomous capital inflows.
The Acting Director of Corporate Communications Department, CBN, Isaac Okorafor, said that the continued interventions were in line with the pledge made by the Governor, Godwin Emefiele, to sustain market liquidity in order to boost production and trade.
He said the feedback from the wholesale and retail segments of the Nigerian foreign exchange market showed that customers were satisfied with their level of access to foreign exchange.
He also assured Nigerians that with the recent confirmation of Deputy Governors and Monetary Policy Committee (MPC) nominees by the Senate, it will further spur the bank towards taking sound decisions needed for economic development.
Details obtained from the bank indicate that the amount released was for requests in the agricultural, airlines, petroleum products and raw materials and machinery sectors.
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