As Market Awaits N420bn Maturing Treasury Bills


By Obinna Chima

 Treasury bills worth N420.317 billion are expected to mature this week. A breakdown of the maturing showed it is made up of 91-day bills worth N39.006 billion; 182-day bills worth N23.024 billion; 363-day bills worth N205.942 billion and 364-day bills worth N152.343 billion will mature via open market operations (OMO) on Thursday.

However, the maturing instruments are expected to offset expected treasury bills auction worth N214.373 billion, viz: 91-day bills worth N39.006 billion; 182-day bills worth N23.024 billion and 364-day bills worth N152.343 billion.

To this end, analysts at Cowry Asset Management Limited anticipate improvement in financial system liquidity and resultant stability in interbank rates.

Last week, the Central Bank of Nigeria (CBN) auctioned treasury bills worth N42.053 billion which was more than offset by matured treasury bills worth N51.14 billion, viz: 143-day bills worth N27.97 billion, 177-day bills worth N8.04 billion and 181-day bills worth N15.13 billion.

However, amid addition outflows to satisfy demand of forex end users, NIBOR for overnight funds, 1 month, 3 months and 6 months rose to 20.33% (from 9.64%), 20.45% (from 19.41%), 22.28% (from 22.01%) and 24.50% (from 24.08%) respectively.

Also, the Nigerian Inter-bank Treasury Bills’ True Yield Fixing (NITTY) rose across all of the maturities amid sell pressure – yields on 1 month, 3 months, 6 months and 12 months maturities rose to 18.59% (from 16.58%), 19.62% (from 17.58%), 20.43% (from 20.11%) and 22.50% (from 22.33%)  respectively.

 Forex Market

Last week, the naira appreciated week-on-week in most foreign exchange market segments. The naira firmed against the U.S. dollar at the interbank and parallel market segments by 0.37% and 2.39% to N323.81/$ and N367/$ respectively. This followed CBN’s injection of $190 million into the foreign exchange market of which $100 million was allocated to Wholesale (SMIS), $50 million was allocated to Small and Medium Scale Enterprises while $40 million was sold for invisibles.

According to Cowry Asset Management, the local currency also appreciated at Investors & Exporters Forex Window (I&E FX) by 1.82% to N373.28/$, but weakened at the Bureau De Change segment by 0.56% to N362/$. Meanwhile, the weekly movements in most dated forward contracts at the interbank OTC segment suggested future stability of the naira/$ exchange rate amid rise in the external reserves increased week-to-date by 0.14% to $30.29 billion as at Wednesday, 07 June 2017. The 1 month, 3 months, 6 months and 12 months forward contracts remained stable week-on-week at N320/$, N328.07/$, N336.56/$ and N354.04/$ respectively.

Furthermore, the spot rate depreciated by 0.05% to N305.60/$ despite the $7.5 million in intervention sales by CBN to banks.

“In the current week, we expect further stability in the foreign exchange market with possible appreciation against the dollar subject to CBN’s level of intervention,” they predicted.

Bond Market

In the bond market, FGN bonds traded at the OTC segment moved in mixed directions: The 20-year, 10.00% FGN JULY 2030 debt and the 10-year 16.39% FGN JAN 2022 bond shed N0.06 and N0.03 respectively; their corresponding yields rose to 16.09% (from 16.07%) and 16.19% respectively.

However, the 7-year 16.00% FGN JUN 2019 debt gained N0.05 and N0.06 respectively; their corresponding yields fell to 16.43% (from 16.45%) and 16.43% respectively.

Elsewhere, FGN Eurobonds traded on the London Stock Exchange depreciated in value across most of the maturities amid profit taking.

The 5-year, 5.13% JUL 12, 2018 bond and the 10-year, 6.38% JUL 12, 2023 bond appreciated by $0.03 (yield rose to 3.42%) and $0.02 (yield rose to 5.54%) respectively.

“This week, we anticipate stability in bond prices in the OTC market on the back of expected boost in financial system liquidity,” they added.

Sell of Dollar Position

The CBN last week paved the way for authorised dealers in the foreign exchange market to offset their excess foreign currency trading positions to other authorised dealers in the market without seeking the prior approval of the regulator.

The central bank, in a circular, said all authorised dealers shall be subject to a maximum spread of N1, adding that funds purchased by an authorised dealer from another dealer on the interbank market shall not be held in position overnight by the buying authorised dealer or sold to another authorised dealer.

The CBN, in the two-page document signed by its Director, Financial Markets Department, Dr. Alvan Ikoku, added: “Such interbank purchases shall only be sold by the buying authorised dealer to its customers for Permitted/Eligible Transactions as outlined in the above-referenced circular. All documentation requirements for Permitted Transactions shall apply.

“Authorised dealers shall not exceed their respective foreign currency trading position (FCTPL) without approval of the CBN. Compliance with the FCTPL shall strictly be monitored by the CBN.

“All interbank trades – spot, forwards, futures, option and swaps – that have an impact on an authorised dealer’s FCTPL are expected to comply with the rate reasonability standards.”

In addition, the CBN pointed out that it reserves the right to intervene, as a buyer or sellers as it deems it fit in the interbank market.

It advised the dealers to encourage their corporate clients to on-board the FMDQ-advised forex trading system immediately, in order to avoid sanctions and to deepen the market.

Fitch on Banks’ Dollar Liquidity

One of the leading global rating agencies, Fitch Ratings last week noted that Nigerian banks’ ability to access foreign currency (FC) has improved considerably since the CBN introduced a foreign exchange window at end-April aimed at investors and exporters.

The Nigerian Autonomous Foreign Exchange Rate Fixing (NAFEX) mechanism, commonly referred to as the “Investors’ and Exporters’ FX Window”, appears to be boosting FC supply and the flow of FC liquidity into the banking system, the agency stated.

According to the agency improved access to FC means that liquidity pressures have, for now, eased for Fitch-rated banks.

FC was in acute short supply through much of 2016 and early 2017, restricting imports and forcing several Nigerian banks to extend maturities on their trade finance obligations. NAFEX provides investors and exporters with a more transparent mechanism through which they can sell FC to willing buyers. Authorised banks act as intermediaries, clearing funds supplied by portfolio investors and exporters and ensuring timely execution of settlement for buyers. Despite its short record, volumes transacted through NAFEX are growing.

“In our opinion, NAFEX offers a more transparent alternative to accessing FC than is available through the other foreign-exchange markets in the country. Several exchange rates operate in Nigeria.

“The CBN was the main supplier of FC during the height of the FC liquidity crisis and it still sells FC to the market through regular auctions, with banks acting as intermediaries,” Fitch added.

Boost for Exports

Also, the CBN last week directed that bills of lading in respect of exports from Nigeria shall henceforth carry Form NXP number of the underlying cargo.

The central bank stated this in a circular addressed to all authorised dealers, exporters and the general public that was titled: “Exports from Nigeria: Compliance with Memorandum 11 of the Foreign Exchange Manual,” obtained on its website.

The four-paragraph circular that was signed by the Director, Trade and Exchange Department, CBN, Mr. W.D. Gotring added: “Consequently, all exporters are required to register Forms NXP with an authorised dealer of their choice prior to shipment in line with Memorandum 11 Section 1(a) (I).

“For the avoidance of doubt, it shall be breach of extant regulations for any shipper to take on-board cargo for which a Form NXP is not duly completed by the exporter. This circular takes immediate effect. Please ensure strict compliance.”

Reward for Whistleblowers

The federal government last week confirmed that it had released N375,875,000 to the first batch of 20 providers of information under the Whistleblower Policy, culminating in the recovery of N11,635,000,000.

Of the N375.8 million, the 20 whistleblowers were paid various amounts, the government stated.

The Ministry of Finance, in a statement quoted the minister, Mrs. Kemi Adeosun as saying: “This payment, which is the first under the Whistleblower Policy, underscores the commitment of the President Muhammadu Buhari-led administration in meeting obligations to information providers. The policy is an essential tool in the fight against corruption.”

Adeosun further disclosed the recent amendments to the Whistleblower Policy, including the introduction of a formal legal agreement between information providers and the federal government, which is executed by the Minister of Justice and Attorney-General of the Federation (AGF).

The minister also provided details of the Whistleblower Unit (WBU), a multi-agency team, which is resident in the Ministry of Finance.

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