Liquidity condition in the financial system eased last week in anticipation release of funds to the three tiers of government by the Federation Account Allocation Committee (FAAC) from tomorrow
The FAAC meeting held last Tuesday, approving the sum N461.67 billion for distribution to the three tiers of government, which is expected start hitting the system from tomorrow.
Data from the Financial Markets Dealers Association (FMDA) indicated that the 7-day Nigeria Inter Bank Offered Rate (NIBOR) closed the week at 15.58 per cent indicating a decline compared to 16.04 per cent the previous week, while the call money declined from 15.5 per cent to 15.79 per cent the previous week.
Also, the 30 and 60-day NIBOR moved to 15.95 per cent and 16.41 per cent from 16.25 per cent and 16.58 per cent respectively, while the longer tenored 90, 180 and 365-day rated fell to 16.87, 17.08 and 17.35 per cents from 16.75, 17.0 and 17.05 per cents respectively.
Despite the drop in interbank rates, analysts do not expect the release budgetary allocation for the month of May to make huge impact in the liquidity situation in the system, anticipated higher demand for naira to use at bond, treasury bill and forex auctions.
The money market experienced tight liquidity throughout last week as a result of the withdrawals from the system by the state-owned energy company NNPC and a tax remittance by telecoms company MTN drained liquidity from the system, traders said on Friday.
Meanwhile, the naira closed at N155.90 to the dollar last week at the official foreign exchange window same as the previous week, after the Central Bank of Nigeria (CBN) sold a total of $750 million at the two auctions of the Wholesale Dutch Auction system (WDAS), higher than the $700 million sold the previous week
NNPC, a major dollar supplier to the interbank market, sold about $400 million to some lenders this week and recalled its naira proceeds to its account with the central bank, while telecoms giant MTN remitted part of its corporate tax to the government, draining liquidity from the system.
“Notwithstanding, seemingly strong importer demand, the increased intervention by the CBN and expected end-of-month dollar sales by oil firms going into next week bodes well for the naira’s near-term outlook,” Ridle Markus, Dumisani Ngwenya and Mike Keenan, Johannesburg-based strategists at Absa Capital, wrote in a report.
The foreign exchange reserves, which have risen 14 per cent this year, and hit the high of $37.76 billion as at June 6, 2012 fell for an eleventh straight day to $37.13 billion, according to June 21 data compiled by the central bank.
The reserve has come under pressure from declining oil price as well as decline in production output and theft of the country’s major revenue earner.
Coordinating Minister for the Economy and Minister of Finance, Dr Ngozi Okonjo-Iweala, earleir expressed concern that daily declining crude oil production and sales was affecting the build up of the external reserves. In the month of April, the minister said daily crude oil production decline was at 17 per cent.
The naira was under pressure recently due to “a pick-up in dollar demand, particularly from fuel importers, leading to the central bank having to make periodic interventions on the inter-bank market,” Gregory Kronsten and Olubunmi Asaolu, London-based analysts at FBN Capital Limited., wrote in a note to clients. They see the naira reaching 163 per dollar year-end and 170 by the end of 2013
A total of 100.62 billion naira in treasury bills with 91-day and 182-day maturities at its bi-monthly auction, with mixed yields compared with the previous auction, the central bank said on Friday. A total of N134.57 billion treasury bills are expected to be sold this week.
The bank on Thursday sold 37.49 billion naira worth of the 91-day paper at a return of 14.05 percent, lower than the 14.10 percent at the previous auction, while it issued 63.13 billion naira worth in 182-day bills at 15.31 percent compared with 14.94 percent at the previous auction.
Total subscriptions stood at 152.69 billion naira, but the central bank stuck to its initial amount offered.
The third quarter treasury bill issuance calendar released by the apex bank during the week indicated that a total of N841.56 billion worth of treasury bills ranging from three months to one year would be raised in the third quarter of the year. The offer in the third quarter was lower than the N917.76 billion offered at the previous quarter.
The Debt Management Office (DMO) has planned to sell N83.91 billion worth of 5-year, 7-year and 10-year Federal Government of Nigeria (FGN) Bonds.
The apex bank said it would auction 235.19 billion naira worth in 91-, 182- and 364-day paper in the last two weeks of June, 250.44 billion naira worth in July, 212.70 billion naira in August and 142.97 billion naira worth of the same tenor in first week of September.