Confidence steady as investors discount political risks

Confidence in the nation’s markets by investors may have been sustained since the announcement of the Presidential results, with the cyclical phase of the polls drawn to a close over the weekend.

Already, Moody’s Credit Ratings Agency has admitted that the peaceful conduct of the March 28 elections was positive to market dynamics, although it retained Nigeria’s credit rating at three levels below investment grade, citing apparent fiscal challenges and weakened macro fundamentals.

Analysts said with the new expectations of a successful outcome in the last set of the polls, investors would now further re-price risks in the Nigerian economy and financial markets, especially the discounting of political risks.

“We expect a bullish capital market this week, similar to the one witnessed after the presidential election. Nonetheless, the continuous decline in the level of external reserves ($29.6 billion), low oil prices and fiscal challenges remain a drawback on investor sentiments,” analysts at Afrinvest Securities Limited said.

Meanwhile, the money market liquidity level had opened the week higher after Easter Monday holiday, relative to last week, as balance of banks and discount houses rose to N220 billion on Tuesday while Net Standing Lending Facility accessed by the banks from the Central Bank of Nigeria reduced to zero.

Market liquidity remained robust all week with opening balances averaging N197 billion for Tuesday and Thursday, compared to last week’s average of N172.1 billion.

However, money market and interbank rates trended higher this week due to the scheduled bi-weekly Credit Reserve Requirement (CRR) debiting due Thursday and Treasury Bills Primary Market Auction.

The Open Buy Back (OBB), Overnight and Nigeria Interbank Offered Rate (NIBOR) average rates rose from 12.7 per cent, 13.2 per cent and 14.7 per cent on Tuesday to close at 27.2 per cent, 28.7 per cent and 19.3 per cent respectively on Friday when the auction and CRR debiting were conducted.

Though N183.7 billion Treasury Bills instrument matured into the system on Thursday, with a commensurate amount reissued by the CBN through the 91 days, N20.2 billion; 182 days, N43.5 billion and one year, N120 billion instruments, it did not douse the rates.

The 91 days, 182 days and one-year bills were issued at equivalent yields of 10.5 per cent, 14.1 per cent and 14.2 per cent.and for the greenback also witnessed a significant decline as speculators who were hoarding the naira ahead of unforeseen post-elections unrest resolved to further loosen their grips and trade dollars for Naira.

At the interbank market, the naira closed at N199.13/$, having depreciated on Thursday by 1 kobo to close at N199.12/$, signalling a marginal change week-on-week, compared to that of the parallel market where a dollar was exchanged below N200/$ after the Easter Holiday till date.

Last week, the external reserves declined by over $177 million, bringing year-to-date sliding profile to 14.1 per cent, as it settled at $29.6 billion.

In the middle of the week, CBN, in a move to defend the value of the Naira, had read riot act that business owners carrying out transactions in foreign currency are liable to face criminal proceedings.