Interbank Liquidity Rises on Treasury Bills Repayment  


By Obinna Chima

Liquidity in the banking system increased to N1.2 trillion as repayment for treasury bills hit the system.

Specifically, the development was attributed to the spillover effect of Central Bank of Nigeria (CBN)repayment of about N177.3 billion for maturing open market operation (OMO) bills.

Owing to this, a report by Afrinvest Securities Limited showed that the open buy back (OBB) and overnight (OVN) rates declined week-on-week.

At the OMO auction, the CBN issued 91-day (offered: N200 billion, Sale: N63.9 billion) and 245-day (offered: N500 billion, sale: N684.8 billion) instruments at 12.5 per cent and 14.3per cent respectively.

In the treasury bills market, performance was largely bullish as average rate across tenors traded lower on three of four trading days. However, the CBN carried out a Primary Market Auction (PMA) where the 91-day (offered: N9.5 billion,subscription: N10 billion, Allotted: N9.5billion); 182-day (Offered: N47.6 billion, Subscription: N20.4 billion, Allotted: N17.6 billion) and 364-day (Offered: N38.1 billion, Subscription: N173.9billion, Allotted: N68.1 billion) were allotted at stop rates of 11.75 per cent, 12.70 per cent and 13.04 per centrespectively.
“The auction result clearly displays investors’ appetite for long dated treasury bills instruments as interest rate outlook continues to favour gradual moderation in the next couple of months.

“Based on our short-term outlook, we expect the Treasury Bills market to remain bullish given the optimistic economic outlook and the CBN’s policy bias for easing,” Afrinvest stated.

Meanwhile, in the foreign exchange market, in a bid to sustain system liquidity and maintain stability across the different segments of the market, the CBN continued its weekly interventions of US$210 million via the Wholesale SMIS (Secondary Market Intervention Auction).

Consequently, rates traded flattish within tight bands during the week. The parallel market rate opened flat at N362/US$1 and remained unchanged till the end of the week.
On the other hand, in the Investor and Exporters’ (I&E) foreign exchange window, the Nigerian Autonomous Foreign Exchange (NAFEX) rate opened the week appreciating 17 kobo to N359.83/US$1

However, NAFEX rate appreciated 13 kobo week-on-week to close at 360.01/US$1.

The total value of open contracts of thenaira settled OTC futures in the FMDQ OTC futures market improved by US$57.2million, representing a 1.8 per cent week-on-week growth to US$3.3billion on Friday from US$3.2 billion last week close. Nonetheless, the APR-2018 instrument was the most subscribed with a total market value of US$660.5m (contract price: N360.31/US$1.00) while the MAR-2019 was the least subscribed with a total market value of US$8.8m (contract price: N361.96/US$1.00).
“Our expectations in the near term is that rates will continue to trade within tight bands as the central bank remains committed to sustaining its forexinterventions in the face of domestic macroeconomic and external sector positives, including the steady accretion to the external reserves,” the firm added.