Rates remain high, as naira falls further

THE money market rates sustained rising profile for the third week, as low level liquidity caused by increased takings by Deposit Money Banks (DMBs) at the CBN discount window, mopped up available cash in circulation. 

  Consequently, upward trend, which ended the previous week, were sustained in the money market at the beginning of the week.

  For instance, the Overnight Rate (O/N), Open Buy Back (OBB) and average Nigeria Interbank Offered Rate (NIBOR) closed at 17.5 per cent, 18.8 per cent and 17.1 per cent respectively, on Monday. 

  Rates also inched further across instruments, with the O/N and OBB rates closing at week highs of 45.8 per cent and 48.4 per cent in the middle of the week, while the NIBOR rose to 21.3 per cent.

 However, a securities company- Afrinvest Securities Limited, noted that concerns about low level of liquidity was dissipated by the payment of the maturing Open Market Operations (OMO) bills worth N200.6 billion on Thursday, with no significant effect by the N46.2 billion OMO issuance by the Central Bank of Nigeria (CBN). 

  The development also raved up the banking system liquidity as opening balance rose to N355.3 billion on Thursday from N84.7bn on Monday. 

  Consequently, rates moderated across instruments towards the end of the week, with the O/N and OBB, on Friday, closing moderately at 10.2 per cent and 9.2 per cent, while NIBOR rates declining 3.8 per cent week-on-week to close at 14.9 per cent.

  Analysts at Afrinvest expressed optimism that the rates will stay at low levels due to the prevailing level of liquidity in the market this week.

  Meanwhile,
the new monetary policy measure taken by CBN in a bid to defend and reduce the pressure on the Naira- the closure of the rDAS/wDAS window, may have obstructed access to information on the supply of foreign exchange at the Interbank market.   

  Specifically, banks were mandated to submit total dollar demand of customers through the interbank intervention process, but the information on the total dollar supply in the market has remained undisclosed. 

  According to Afrinvest report over the weekend, the naira remained weak against the dollar as it depreciated throughout the trading days of the week.

  The securities company said that after trading below the N200/$ psychological level for six days, the naira depreciated 0.4 per cent to N200.1/$ at the interbank on Monday and hit the losing streak to N2.99/$ week-on-week to close the week at N202.23/$ at the interbank market. 

  The development was attributed to customers’ scramble for dollars from sources other than the CBN when the cut-off time for submission of customers’ dollar demand is not met.

  “We expect that in the coming weeks, banks would meet up with cut-off time and the CBN would hence supply the needed dollars at the interbank market and further reduce the rate of depreciation of the Naira,” the company said.

  Also, the FGN bond market was bearish last week, as the average yield rose by a marginal eight basis points (bps) to 16 per cent, driven by higher yields quoted by dealers for long tenured bond instruments, which offset the bargain hunting that pressured yields at the short end of the curve. 

  But the analysts noted that with the recent calm in oil prices, coupled with the reduced volatility in the foreign exchange market, “we expect short term calm in yield environment as the changes in fundamentals of the economy will continue to bode well on investor sentiment.”