By Obinna ChimaÂ
Treasury bills worth N424.87Â billion are expected to mature viaÂ theprimaryÂ and secondaryÂ marketsÂ this week.
The maturing treasuryÂ billsÂ are expected toÂ Â offsetÂ the fixed income instrumentÂ worth N180.86 billion to be rolled over by CentralÂ Bank ofÂ Nigeria (CBN)Â via the primary market.
Analysts at Cowry Asset Management Limited disclosed this in their weekly review of the financial market.
In all, the central bank is expected to roll overÂ 91-day bills worth N6.22 billion, 182-day bills worth N50 billion and 364-day bills worth N124.64 billion.
However, last week, theÂ CBN auctioned treasury bills worth N232.63 billion viaÂ openÂ marketÂ operations (OMO). The outflowduring the weekÂ was partly offset byÂ aÂ N216.04 billion in maturedtreasury bills.
Also, Standing Deposit Facility (SDF) worth N736.52 billion outweighed Standing Lending Facility (SLF) worth N297.32 billion by 247.72Â per cent, which indicatedÂ surplusÂ liquidity in the market.
Consequently,Â theÂ Nigerian Interbank Offered Rates (NIBOR)moderated for most tenor buckets amid renewed financial system liquidity ease.
For instance,Â NIBOR forÂ one-month,Â three-month andÂ six-month tenorsÂ fellÂ week-on-weekÂ to 13.54Â per centÂ (from 13.56%), 13.95Â per centÂ (from 15.08%) and 14.84Â per centÂ (from 17.09%) respectively.
But, theÂ NIBOR for overnight tenor bucket rose to 5.71Â per centfrom 3.5 per cent.
On the other hand, the Nigerian Interbank Treasury Bills True Yield (NITTY)Â rose for all maturities tracked amid renewed bearish activity.
That is,Â yields on theÂ one-month, 3–Â month, 6–month and 12–month maturities rose to 12.35Â per centÂ (from 10.25%), 12.64Â per cent(from 11.54%), 12.90Â per centÂ (from 12.29%) and 13.32Â per cent(from 12.99%) respectively.
â€œHence, we expect renewed liquidity strain with resultant spike in interbank rates,â€ Cowry Asset Management stated.
Meanwhile, in the bond market, the bullish performanceÂ observed in the preceding weekÂ was reversedÂ lastÂ week as average yield across tenors rose onÂ threeÂ ofÂ the fiveÂ trading sessions, up 17Â basis points week-on-week.
According to Afrinvest Securities Limited, the week opened on a negative note with average yield trending 10Â basis points (bps)higher to 13Â per cent,Â from 12.9Â per centÂ in the preceding weekfollowing sell offs on short and longer tenored instruments.
However, onÂ Tuesday, average yield inchedÂ one basis pointÂ lower,but trended north–wards by midweek, upÂ by five basis pointsÂ to 13.1per cent. However,Â on Thursday, average yield across tenors marginally declinedÂ by one basis pointÂ before increasing byÂ four basis pointsÂ to settle at 13.1Â per cent lastÂ Friday.
The investment firm predicted that this week,Â average yieldÂ wouldtrend lower as investorsâ€™ appetite for longer tenored instruments remains upbeat.
Similarly, performance of the Sub-Saharan Africa Sovereign Eurobonds was largely bearish as sell offs from the precedingweek, stoked by the strengthening dollar and higherÂ treasuryÂ billsyields, were sustainedÂ duringÂ the week.
In light of this, yield on 24 of 29 instruments roseÂ week-on-week.
For instance, theÂ Ivory CoastÂ 2032, South AfricaÂ 2019, 2020, 2022andÂ 2041 instruments recorded the most buy interest in the week.
On the flipside, average yield across the Nigerian, Ghanaian, Gabonese, Kenyan, Zambian and Senegalese instruments grew 30basis points,Â 10Â basis points, 11Â basis points, 10Â basis points, 20Â basis pointsÂ and 10Â basis points week-on-weekÂ respectively.
All instruments saveÂ for theÂ GhanaÂ 2022 (+0.4%) currently have a negativeÂ year-to-date (YTD)Â price return while ZambiaÂ 2024 (-19.2%) isÂ currentlyÂ the worst performing.
Also, the bearish performance of Nigerian corporate Eurobonds was sustained into the third consecutive week as yield onÂ eight outÂ of 11 instruments roseÂ week-on-week.
The instrument with the most buying interest was EcobankÂ 2021 (down 15Â basis pointsÂ to 9.3%) while ZenithÂ 2019 (up 75Â basis pointsÂ to 5.4%) recorded the most sell-offs. However, the instruments with the best YTD price returnÂ were DiamondÂ 2019 and FBN 2021,Â as they wereÂ up 4.6Â per centÂ and 3.4Â per centrespectively.Â
The central bankÂ sustained its weekly intervention in theÂ forex marketÂ last week. But itÂ intervened with a slightly lower amount – US$155Â millionÂ (relative to US$210Â million inÂ Â previous weeks),Â viaits wholesale Secondary Market Intervention Sales (SMIS) window.
The move wasÂ to maintain stability and liquidity across the market.
As a resultÂ of this, the naira traded around tight bands across all segments.
The CBN spot rate remained relatively flat during the week, opening the week at N306/US$1Â andÂ appreciatingÂ by fiveÂ kobo to N305.95/US$1 by midweek. It remainedÂ unchangedÂ at this rateÂ tillFriday, indicating aÂ fiveÂ kobo appreciationÂ week-on-week.
Similarly, in the parallel markets, marginal movements were recorded as theÂ naira opened the week at N363/US$1 before strengthening by N1 to N362/US$1 by the close of the week.
At the Investors & Exporters (I&E)Â forexÂ window, the NAFEX rate appreciated 26Â kobo to N361.15/US$1 at the start of the week. However, the naira depreciatedÂ byÂ 10 kobo by midweek to N361.25/US$1. But itÂ appreciated to N361.01/US$1 by the end of the week, indicating a 40Â kobo appreciationÂ week-on-week.
Furthermore, activity level in the window softened as weekly turnover fell 15.7Â per centÂ to US$1.2Â billion,Â fromÂ theÂ US$1.4Â billion recorded the prior week.
In the FMDQ OTC futures market, the total value of open contracts of theÂ naira settled OTC futures increased by US$575.4Â million(14.6% expansion) to US$4.5Â billion,Â relative toÂ theÂ US$3.9Â billion recorded the preceding week.
The most subscribed instrumentÂ was the NOV-2018 with a total market value of US$676.1Â millionÂ (contract price: N362.57) while the APR-2019 instrument was the least subscribed with a total market value of US$72.3Â millionÂ (contract price: N363.32).
â€œIn the coming week, we expect theÂ naira to trade at similar levels on the back of the CBNâ€™s sustained intervention in the foreign exchange market,â€ Afrinvest analysts stated.
Bilateral Currency Deal
Following the $2.5 billion bilateral currency swap agreement signed last month between the Central Bank of Nigeria (CBN) and the Peopleâ€™s Bank of China (PBoC), the CBNÂ last weekannounced plansÂ to start bi-weekly auctions of the Chinese yuan.Â The Bilateral Currency Swap Agreement (BCSA) is for a maximum of 15 billion Yuan or N720 billion with a three-year tenor.
For an authorised bank to access the bi-weekly auction of the Chinese currency, the CBN stated in the circular that such dealers â€œshall open Renminbi accounts with a correspondent bank and advise the CBN with its Renminbi account details which may either be with a bank onshore or offshore Chinaâ€.
It also directed importers intending to import from China to obtain proforma invoices denominated in Renminbi as part of the documents required for the registration of â€˜Form Mâ€™.
The CBN said in the circular that forex purchased in the window would not be used for payments on transactions in which the beneficiaries are not in China, adding that authorised dealers shall not open domiciliary accounts dominated in Renminbi for customers.
â€œFor the purpose of this regulation, authorised dealers shall be deposit money banks and merchant banks.
â€œThe CBN may conduct bi-weekly Renminbi bidding sessions. The Renminbi sales shall be applicable only to trade-backed transactions.
â€œImporters and exporters shall continue to pay the applicable levies on imports and exports respectively.â€
Banksâ€™ Borrowing from CBN
Commercial and merchant banks in the country visited the Central Bank of Nigeriaâ€™s (CBN) Standing Lending Facility (SLF) window, a window for banks to borrow from the CBN more frequently in 2017, compared with the previous year, due to the tight monetary policy stance of the Bank, a report has shown.
The CBN disclosed this in its 2017 annual activity report by its Financial Market Department, posted on its website at the weekend.Â The situation may not have been different since the beginning of the year, as the central bank has maintained its tight monetary policy stance.Â The report stated that the merchant and Deposit Money Banks (DMBs) requested the standing facilities to square-up their positions.
According to the report, the average daily request for SLF was N216.34 billionÂ in 246 days, out of which Intra-day Lending Facility (ILF) conversion was N130.63 billion, amounting to 60.38 per cent of the total request.
The average daily interest charged was N159.96 million. But in 2016, the average daily request for SLF was N130.47 billionin 207 days, out of which ILF conversion was N84.62 billion, while average daily interest income was N94.76 million.