N465.7 billion OMO, T-bills’ auctions spike rates

Oil price pressure persists on forex reserves 

Multiple monetary policy actions through the Open Market Operations (OMO) and Treasury Bills (T-Bills) issuance amounting to N465.7 billion, tightened the money supply in the economy, sending market rates high.

The Open Buy Back (OBB) and Overnight rates had opened high last week at 12 per cent and 12.5 per cent respectively, as the week began with liquidity mop up, as a follow up on Friday’s activities, with a cumulative amount of N242.1 billion.

Both market rates- OBB and Overnight, rose 2.5 per cent on Monday, but rose further by 1.9 per cent to 13.8 per cent and 2.1 per cent to 14.6 per cent respectively, as investors sought to retain cash for Wednesday’s bond auction.

The upward trend of the rates persisted as the monetary authorities raised N143.6 billion in T-Bills, but driven more by the assessed lower level of liquidity in the system after the Cash Reserve Ratio (CRR) debit was effected in commercial banks on Thursday.

Consequently, the week closed with money market rates settling at 14.8 per cent for (OBB) and 15.1 per cent (overnight), as N80 billion bond auction pressured market liquidity to further drive rates high. Analysts at Afrinvest Securities Limited said this week would be marked by moderate rates with the mixture of N120.5 billion borrowing in T-Bills and N134.6 billion maturing instruments.

At the foreign exchange market, the volatility in the international market for crude oil sustained its pressure on the nation’s external reserves’ accretion drive, as the price of the commodity settled low at $60.55 per barrel at the weekend. Presently, the external reserve is estimated at $29 billion, representing two per cent decline month-to-date and 15.9 per cent year-to-date.

Meanwhile, activities in the Nigerian Interbank Foreign Exchange Market were relatively stable as the naira opened at N199/$ and traded within a tight range on all trading days.

The daily report of the Nigerian Interbank Foreign Exchange Market from the Central Bank of Nigeria showed that the naira/dollar rates had remained around N196.90/$ within the week.

For the analysts at Afrinvest, the development suggests the persistence of a tempered atmosphere in the currency market for the week, but added that with CBN’s policy measures on exchange rate intact, “we expect the currency market rate to stay tempered on monetary policy concerns and events in the polity in the week ahead.”

The bond market activities showed mixed fortunes across all tenors with soft changes in daily bond yields. At the close of the week, average yields on bonds declined three bps week-on-week to settle at 14.7 per cent relative to the previous level of 14.8 per cent.

The Debt Management Office (DMO) re-opened the issuance of FEB 2020, MAR 2024 and JUL 2034 bond instruments to raise N40 billion, N15.2 billion and N25 billion respectively on 17 June, 2015. The re-opened instruments were however, oversubscribed to the tune of N50.6 billion, N36.3 billion and N44 billion each.