Minister of State for Finance, Alhaji Yerima Ngama
By Obinna Chima
The illiquidity in the money market continued last week as a result of net outflow of about N64.47billion from the system, a report by FSDH Securities Limited has shown.
The FSDH weekly report made available to THISDAY at the weekend, explained that the relative tightness in the system was due to the withdrawal of about N246.02 billion from the system via the FGN Bond and the forex sales by the Central Bank of Nigeria (CBN).
It also stated: “Activities at the CBN’s Open Market Operation (OMO) of the Central Bank of Nigeria (CBN) brought some respite into the system at the beginning of the week.”
Meanwhile, THISDAY checks revealed that the Nigerian Interbank Offered Rates (NIBOR) dropped to an average of 22 per cent on Friday, as against the 27.06 per cent it attained the preceding Friday, due to the release of funds to the three tier of government by the Federation Account Allocation Committee (FAAC).
For instance, while the overnight tenor closed at 20.88 per cent on Friday, from 25 per cent the preceding Friday, the 7-day tenor also closed at 21.25 per cent, lower than the 26.25 per cent it was the preceding Friday. Similarly, where 30-day tenor reduced to 21.96 per cent, from the preceding week’s position of 26.75 per cent, the 60-day tenor also fell to 22.29 per cent.
But the FSDH report insisted that the “market continued to respond to the existing monetary policy measures in the market. It was observed that rates slowed down Monday and Tuesday due to CBN’s intervention via the repo market.
“At the re-opening of the 5-year FGN Bond auction with a maturity date of April 27, 2017, the CBN offered and sold a total of N25 billion, while it was 176.44 per cent subscribed at N44.11 billion. The bond carried a marginal rate of 16.33 per cent.
“At the re-opening of the 7-year FGN Bond auction with a maturity date of June 29, 2019, the CBN offered and sold a total of N25 billion, while it was 283.88 per cent subscribed at N70.97 billion. The Bond carried a marginal rate of 16.14 per cent,” it added.
The market will not open today and tomorrow due to the public holiday declared in commemoration of the 2012 Eid-el-Fitri celebration.
At the forex market, the CBN reduced its supply of the greenback at the bi-weekly auction last week by 36.67 per cent, to $380 million, compared with the $600 million offered the preceding week. Similarly, the amount it sold reduced by 51.8 per cent to $274.14million, from $568.77million sold the preceding week.
However, the naira appreciated against the dollar in all the three segments of the market. The naira gained three kobo at the bi-weekly market to close the week at N154.80/$1 from N154.83/$1 in the preceding week. At the interbank market it gained 25kobo to close the week at N158.10/$1 on Friday, from N158.35/$1 while at the parallel market, it also chalked up N1.70 to close the week at N160.50/$1.
The Federation Accounts Allocation Committee (FAAC) last week deducted $1 billion (about N155 billion) from the Excess Crude Account (ECA) and shared it among the three tiers of government. Also, a total of N520 billion was distributed among the tiers of government for July, bringing the total amount shared to about N675 billion.
Minister of State for Finance, Alhaji Yerima Ngama, had said the ECA now stood at about $7.5 billion.
The minister had also said the committee had targeted to grow the ECA to about $10 billion by December, adding that the target was no longer far-fetched.
Ngama said gross revenue to the federation increased by N61.843 billion to stand at N825.396 billion for the month compared to N763.553 billion in the previous month.
Performance Agreement for Ministers
President Goodluck Jonathan last week introduced performance-based contracts for ministers and other strategic government officials. The initiative, which is coming against the backdrop of the crisis of confidence between the presidency and the National Assembly over the perceived poor implementation of past budgets and especially the 2012 budget, THISDAY had reported, would ensure that ministers and other heads of parastatals commit themselves to timelines and specific deliverables in the implementation of the budget and other government policies every year.
The decision to introduce performance-based contracts as an evaluation tool in the implementation of budgets also coincided with the release of N300 billion for capital spending in the third quarter of the year. The contracts, which are also aimed at improving service delivery by public institutions, according to a source, will also spell out sanctions against any minister or head of agency that breaches the contracts.
JP Morgan Index
Indications emerged last week that the Federal Government of Nigeria (FGN) bonds would be included in the JP Morgan Government Bond Index – Emerging Markets (GBI-EM) in a phased approach, over a three-month period.
The JPMorgan’s GBI-EM indices are comprehensive emerging market debt benchmarks that track local currency bonds issued by emerging market governments. A note made available to THISDAY had indicated that the three month would commence from October 1 and end on December 3.
It had also explained: “During each rebalance date, one third of the notional of each FGN bonds will enter the index. At this stage, the inclusion appears to cover three maturities (one of the 2014 instruments; one of the 2019 bonds and the January 2022 bonds).” It however assumed that due to their secondary market liquidity, the April 2017 bond was omitted.
The CBN last week decried the activities of some Deposit Money Banks (DMBs), which it said had been assisting their customers to evade the penal charges on the daily cash withdrawal and lodgement limits. Specifically, the banking sector watchdog revealed that some commercial banks still performed cash collection services for some supermarkets and petrol stations, while others allow their customers to withdraw and deposit cash above the prescribed limits without charging the processing fee. Therefore, the apex bank warned that appropriate penalties should be strictly applied to erring institutions.
The CBN had said: “It has come to our notice that some DMBs aid and abet their customers to circumvent the policy. In particular, some DMBs still perform collection services for some supermarkets and petrol stations, while some allow their customers to withdraw/deposit cash above the free limits, without charging the processing fee.”
A member of the Central Bank of Nigeria’s (CBN), Monetary Policy Committee (MPC), last week told THISDAY that the rationale behind the additional restrictive monetary policy measures adopted at their last meeting, resulting in a liquidity drain in the system the preceding week was not meant to starve the economy of funds.
The MPC member, who spoke to THISDAY on the condition of anonymity, had said members of the committee took the hawkish stance because intelligence had shown that there were a lot of idle funds in the system.
According to the member, the committee adopted the aggressive monetary tightening stance to guard against a speculative attack on the naira.
Continuing, he had explained that the tightening was also adopted to effectively mop up the anticipated release of FAAC funds to the three tiers of government and budgetary releases to the ministries, departments and agencies of the Federal Government.
The federal government last week raised hopes of improvement in power supply as it announced plans to raise electricity output from the current 4,300 megawatts (mw) to a record 9,000mw in “the next few months”.
Senior Special Assistant to the President on Public Affairs, Dr. Doyin Okupe, had said government would attain the new output when it completed the 10 projects under the National Integrated Power Plants (NIPPs).
“This administration met 10 abandoned NIPP projects and has successfully revitalised all. More importantly, they are all within the range of 95-100 per cent completion stage and are awaiting gas supply, which government has taken very concrete steps to address,” it had explained.