by BUKOLA IDOWU, Lagos
The federal government through the Debt Management Office (DMO) last week raised N99.26 billion through bond auction even as interbank lending rates eased on inflow of funds form Federation Account Allocation Committee (FAAC) disbursements.
There had been an inflow of N275.2 billion towards the end of last week, easing up the liquidity crunch in the money market which drove rates to over 37 per cent. Available data on the CBN website showed that the week opened with negative financial system liquidity of N71.7 billion.
As a result, open buy back and overnight rates rose 34.8 and 37.6 percentage points on the first trading session to settle at 50 and 53.3 per cents respectively.
Traders however say they expect a further drop in the overnight rate to around five percent in the next few days if the government, as expected, releases its May budget allocations this week to its agencies. “We are anticipating additional cash flow from budgetary allocations to government agencies,” one currency trader said.
Following the inflow from the FAAC, the CBN had moved to mop up liquidity mopping up N403.1 billion in OMO sales, hence OBB and OVN rates rose rise 25 basis points and 42 bps on Friday. Accordingly, rates closed at 8.8 and 9.5 per cents on Friday, down 6.4 and 6.2 percentage points W-o-W respectively Nigeria’s interbank rate eased to around eight percent on Friday from 15 percent last week after the central bank repaid N152.6 billion in matured debt and paid refunds to banks for their forex cash provisions.
The DMO bond sales last week Wednesday also fetched it N99.26 billion, amount lower than N140 billion which it set to raise. Investors’ appetite for the short tenured bond, the 14.5% FGN July 2021 was low as there were only 16 bids totaling N12.52 billion in value for the bond for which the DMO hoped to raise N40 billion.