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With an eye on the nation’s foreign reserves, the Central Bank of Nigeria (CBN) did everything to ensure the country still has a healthy reserve.
So its supply of foreign dollar to the Wholesale Dutch Auction System (WDAS), the official foreign exchange (forex) market was limited.
But the intermediate intervention of oil firms ensured the naira remained strong. During the month of March alone, the energy firms supplied as much as $1.32 billion to select banks at the forex market.
The result was that naira strengthened against the United States Dollar across all market segments on average relative to February 2012. It strengthened by 28 kobo, 81 Kobo, 112 Kobo and 96 Kobo at the official market, Interbank, Bureau De Change (BDC) and parallel market respectively.
The Financial Market Dealers Association of Nigeria (FMDA) hinged the gain on dollar sales by oil majors to Deposit Money Banks estimated at about $1.32 billion coupled with foreign portfolio inflows occasioned by high yield in the Treasury bills market.
“It is worthy of note that the Naira/dollar relationship was stable across all the market segments as the CBN and interbank spread narrowed from 27th March to end of the month under review owing to interbank market foreign exchange supply”, said the FMDA. As the spread narrows, it becomes increasingly difficult for banks to engage in round-tripping.
Naira to a dollar traded between N155.90/$1 and N156.06/$1 at WDAS in the month under review.
The naira-dollar relationship at the inter-bank market depicted a mixed behaviour in the month but ranged from N157.25/$1 to N158.26/$1.
The BDC and parallel market also recorded stability as they ranged from 159.0/$ to N159.50/$1 and 160/$1 to N161.50/$1 respectively.
Further analysis on month-on-month showed an opening figure of $1/N154.90 and $1/N155.90 for Bid and Offer respectively at the first business day of the WDAS, and closed the month at $1/N155.01 and $1/N156.01 against the closing rate of $1/N154.90 and $1/ N155.900 in February 2012.
At the Inter-bank market, Naira-Dollar relationship opened at $1/N157.71 and $1/N157.81 for Bid and Offer and closed at $1/N157.69 and $1/N157.79 against the closing rate of $1/ N157.42 and $1/N157.52 for Bid and Offer respectively in February 2012. The BDC and parallel markets closed the month at $1/N159.00 and $1/N160.00 respectively.
The premium between CBN and Parallel market as at end March narrowed further to 2.55 per cent; from the 3.59 per cent recorded end February 2012. This is responsible for the calmness in the market.
The effective Supply of foreign exchange at the WDAS window moderated downwards as the Central Bank of Nigeria offered $1.35 billion but sold $1.329 billion against $1.847 billion sold in February 2012 reflecting a 28.04 per cent decrease. Market demand was not disclosed by the apex bank since the beginning of the year. The supply of forex got a boost from the autonomous sources in the month, as inter-bank market recorded dollar injections from Oil majors which totalled an estimated $1.32 billion and helped to provide support for the Naira in the month under review.
Meanwhile, in the forward Market the demand for WDAS-FWD CBN sold zero Forex of one-month forwards against a demand of $30.78 million at a spot rate of N156.07 and forward point of 1.7000, while $45.97 million of 2 months forwards was demanded and sold at a forward point of +3.8500. Three month’s forward was not recorded owing to lack of demand.
Deposit And Lending Rates Differential Widens
Rates of deposit and lending in the month of March 2012 steadied across the observed tenors to record stability as saving rate averaged 2.33 per cent same rate as the previous month. On the lending segment, rates for the prime structured loan stood at monthly average of 17.97 percent to record zero change relative to February 2012; while the normal structured loan rose marginally to 20.80 per cent from 20.80 per cent recorded in the previous month. Rates are expected to moderate around this band the coming months as the monetary authority retained key Monetary Indices at the last MPC meeting.
Government Securities
Treasury Bills (PMA)
The sustenance of the quantitative tightening policy occasioned by the need to ensure price and exchange rate stability resulted in the continued mop-up of liquidity in the system via Primary Market Auction (PMA) and Open Market Operation (OMO).
The apex bank sold N332.23 billion against N298.92 billion bills in February 2012. Subscriptions in the month rose to N803.38 billion against N793.72 billion in previous month.
What accounted for the increase in sales and public subscription could be premised on increased auction sessions as a result of increased maturing PMA bills relative to the previous month.
At the first auction in the month, 91 days, 182 days and 364 days bills were allotted at 14.81 per cent, 15.48 per cent and 15.57 per cent respectively against 14.81 per cent, 16.097 per cent and 16.89 per cent respectively in February. Allotment of 91 days and 182 days at the second auction was done at 14.3 per cent and 16.21 per cent respectively against 14.8 per cent and 15.5 per cent in February 2012.
The third auction session on the back of additional maturing PMA bills, took place with 14.19 per cent and 15.05 per cent recorded as stop rates for 91 and 182 days respectively.
With periodic intervention through the Open Market Operations to manage liquidity in the system, the Central Bank of Nigeria sold N491.59 billion against N261.75 billion sold in February in tenors ranging from 104 days to 364 days. Total public subscription stood at N1.19 trillion relative to N926.91 billion in February.
In terms of inflows to the system, the month recorded N365.52bn against N332.53bn in February. The net withdrawal stood at N458.30bn relative to N228.14 billion recorded the previous month.
Activities in the 2 Way Treasury bills’ Market were largely driven by customer demands, stop rates at the Primary Market auction (PMA) and Open Market Operation (OMO), volume of liquidity in the Money Market as well as foreign portfolio investors in the month under review.
There was demand pressure by investors at the primary market, thus; yield decelerated for the shorter and longer bills except 182-days of the second auction.
The downward trend in PMA & OMO yield and investors’ demand impacted the 2-Way quote market as yield of observed trading maturities ended the month under review lower when compared with yield of maturities traded end-February.
FGN Bonds
The Debt Management Office (DMO) mobilised N50 billion compared with N70 billion raised last month. The Bonds maturities are original tenor 10-year (23-Oct-2019) and 10-year (27-Jan- 2022). (23-Oct-2019) attracted public subscription of N63.30 billion at bids range of 12 per cent to 16.9989 per cent. Allotment of N20 billion was done among 28 successful bids at a marginal rate of 15.30 per cent.
The re-opening of the 10-year maturity (27-Jan-2022) attracted public subscription of N68.10 billion with bid range of 12 per cent and 17.44 per cent. The allotment of N30 billion was done among 47 successful bids at a stop rate of 15.41 per cent.
A total sum of N50 billion was mobilised in March 2012 compared to N70 billion in February 2012.
At the 2-way quote bonds market, activities continued to be skewed towards the short and medium end of the yield curve. At the short, medium and long end of the market yield climbed relative to end-February due to the depressed liquidity volume of the money market, the downside surprise in inflation rate figures and the retention of key monetary variables at the last Monetary Policy Rate (MPC) meeting as well as reduced marginal rates at the Primary auction relative to February’s. The volume of market activities was on the decrease when compared to last month on the back of expected increase in inflation rate which eventually turned out to be on the downside.
