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Liquidity To Rise As N190.7b Hits Financial System



…Manufacturing PMI index rises to 56.9 in April

Liquidity at the financial market is expected to be moderate this week in spite of the Open Market Operation (OMO) that will hold in the week as N190.7 billion in maturing Treasury Bills hits the system.

The Central Bank of Nigeria (CBN) is expected to hold OMO this week mopping up N95.4 billion through 91-, 182- and 364-day Treasury Bills at the Primary Market Auction (PMA). 

With the amount being rolled over representing 50 per cent of the maturing bills, analysts say they expect a further moderation in rates this week due to increasing buying interest as well as high system liquidity. Last week, the CBN bucked the four-week trend of “once in a week” OMO auction announcement last week by conducting an OMO auction on Thursday and Friday.

The Treasury bills market continued its bullish trend as average yield across tenors fell 1.5 per cent week on week to close at 11.3 per cent last week. The medium-term instruments declined the most down 96 basis points week on week as average offer rates closed 10.8 per cent.

Long tenor instrument at 244 days on Friday was approximately 10.9 times oversubscribed with N40 billion  on offer receiving subscription of N435.1 billion and the CBN allotting just 5.1 pet cent of subscriptions, N22.1 billion.

Likewise, the OMO auction on Thursday was oversubscribed with N190 billion on offer receiving subscription of N602.1 billion while N115.7 billion was sold representing 19.2 per cent of subscription.

Analysts and traders say they expect the bullish trend to continue this week ahead of the Treasury Bills Primary Market Auction on Wednesday where rates on the 364-day instrument is seen moderating further on the back of sustained demand. 

Meanwhile, business activities in the Nigeria manufacturing and non-manufacturing sectors continued to increase at a faster pace in April  compared to March as the Purchasing Managers Index (PMI) report released yesterday by the Central Bank of Nigeria (CBN) showed a faster growth in activities.

The Manufacturing PMI in the month of April stood at 56.9 index points, indicating expansion in the manufacturing sector for the 13th consecutive month. The index is an improvement compared to 56.7 and 56.3 index points recorded in March and February but still lower than 57.3 index points recorded in January.

Of the 15 subsectors surveyed in the manufacturing sector, 12 reported growth in the review month as the Cement sub-sector remained unchanged, while the Non-metallic minerals and Primary metal subsectors declined.

The petroleum & coal products, electrical equipment, appliances & components, printing & related support activities, textile apparel leather & footwear, fabricated metal products, chemical & pharmaceutical products, food, beverage & tobacco products, paper products, furniture & related products, plastics & rubber products, transportation equipment has all recorded expansion.

At 58.6 points, the production level index for the manufacturing sector grew for the 41th consecutive month in April 2018. The index indicated a slower growth in the current month, when compared to its level in the preceding month.

Twelve of the 15 manufacturing subsectors recorded increase in production level, one remained unchanged, while the remaining two recorded declines in production level during the review month.

The manufacturing sector employment level index in April 2018 stood at 55.0 points, indicating growth in employment level for the 12th consecutive month. Of the 15 subsectors, nine subsectors increased their employment level, three remained unchanged while three reduced their employment level in the review month.

The composite PMI for the non-manufacturing sector stood at 57.5 points in April 2018, indicating expansion in the Non-manufacturing PMI for the 12th consecutive month.

The April PMI of the non-manufacturing is an improvement over 57.2  index points recorded in March and 56.1 index points recorded for February but still lower than 58.5 index points recorded in January.

Fifteen of the 18 subsectors recorded growth with the management of companies subsector remaining unchanged, while the Transportation & warehousing; and the Electricity, gas, steam & air conditioning supply subsectors recorded contraction.

The Arts, entertainment & recreation; Finance & insurance; Public administration; Utilities; Educational services; Agriculture; Health care & social assistance; Information & communication; Water supply, sewage & waste management; Repair, maintenance/washing of motor vehicles; Professional, scientific, & technical services; wholesale/retail trade; Accommodation & food services; Construction; and Real estate rental & leasing all recorded expansion in the reviewed period.