Banks borrowings from the Central Bank of Nigeria (CBN) through the Standing Lending Facility (SLF) increased last week as traders say they expect liquidity to spur this week on the back of maturing bills and inflow from Federal Account Allocation Committee (FAAC).
As against N147.04 billion that banks took through the SLF window penultimate week, borrowings rose by 63 per cent to N239.695 billion last week. The highest amount for the week had been taken on Wednesday when banks took N100.17 billion from the CBN.
Deposits through the Standing Deposit Facility (SDF) dropped from N564.15 billion the prior week to N193.26 billion as there was no deposit on Tuesday and only N2.15 billion had been deposited on Thursday.
Liquidity which had remained tight at the beginning of last week however eased up on payment of Open Market (OMO) and primary market maturities. At the start of the week, OBB and overnight rates rose 10.7ppts and 12.1ppts to settle at 22.5 and 25.0 per cents respectively from 11.8 and 12.9 per cents recorded the prior week as the impact of CBN OMO auction and weekly foreign exchange intervention offset N87 billion bond coupon payment.
System liquidity had improved towards the end of the week with the maturities as there had been repayment of N259.059 billion on Thursday last week as the CBN paid N151.14 billion OMO maturity and N107.91 billion primary market maturities.
Traders say liquidity is expected to improve this week as OMO maturities valued at N189.45 billion, and the monthly FAAC disbursements to state and local governments are likely to support liquidity in the coming week.
At the foreign exchange market, the naira closed stronger against the dollar at both the Nigeria Autonomous Foreign Exchange (NAFEX) window and the parallel market selling at N360 and N362 to the dollar respectively. At the CBN window, it remained stable at N305.7.
Analyst at FXTM, Lukman Otunuga noted that the naira has remained resilient against the dollar, despite the Federal Reserve raising US interest rates overnight. “Investors were generally disappointed with the US interest rate rise from the Fed, and the Dollar index dropped in the aftermath. This was mostly because the US interest rate increase was already priced into market expectations a long time ago, however, confidence in the Dollar weakened when it was indicated that the Federal Reserve were not planning to raise US interest rates four times this year.
“A hint from Federal Reserve Chair Powell that four US interest rate increases were possible for 2018 was required to support Dollar buying momentum. For as long as the Fed expectations are priced into the market, and investors were already largely expecting three US interest rate rises in 2018, there is no reason to be concerned over what impact a US interest rate rise will have on the Nigerian naira.”