More FX inflow expected in financial markets on CBN policies - Businessday

September 6, 2016
Financial analysts and currency dealers anticipate more foreign exchange (FX) inflow into the money markets this week and going forward. This is premised on the various decisions taken by the Central Bank of Nigeria (CBN) to enhance liquidity in the FX market. Specifically, the CBN on Friday allowed resident Nigerian nationals/or companies who in-flowed foreign currency through an authorised dealer to invest such funds in money market instruments, bonds and equities.

Last week, the FX market recorded $327 million worth of FX inflow, out of which $270 million was channelled into the local debt market. Early in the week, the market responded to CBN's decision to suspend some banks from interbank market, with the impact felt more at the parallel market. Consequently, parallel market rate depreciated all week, from N413/$ on Monday to N420/$ by midweek and a low of N425/$ on Thursday. At the interbank, the spot rate traded within a tight range, hovering between N318.83/$ at the start of the week and N313.31/$ by Thursday, an appreciation from last week Friday's N314.95/$. Within last week, the apex bank licensed more International Money Transfer Operators (IMTOs) in furtherance of its efforts to liberalise the FX market, ensure liquidity and make FX more readily available to low end users.

The banks' regulator also lifted the FX ban earlier placed on nine banks over failure to remit government agency funds to the Treasury Single Account (TSA). However, the derivatives product launched by the CBN on the FMDQ OTC platform has continued to gain traction, particularly the Naira Settled OTC Futures, according to analysts at Afrinvest Securities Limited.

The analysts said the total value of futures contract as of Thursday, September 1, stood at $2.8 billion, rising $1.1 billion M-o-M. During the week, there was noticeable interest in the JULY 19 2017 instrument as the value of open contract rose from $95.75 million to $398.89 million. This is not unsurprising as the instrument commands the lowest price (N231/$) on the calendar.

At the money market, analysts at Cowry Asset Management Limited anticipate moderation in interbank interest rates following 195-day treasury bills worth N293.75 billion, which will mature via Open Market Operation (OMO).

Last week also, interbank lending rate increased as the CBN aggressively mopped up financial system liquidity having issued N520.41 billion in treasury bills via open market operations, viz: 191-day bills worth N126.99 billion (stop rate 18%); 212-day bills worth N51.45 billion (stop rate 18%); 345-day bills worth N93.91 billion (stop rate 18.5%); 224-day bills worth N80.01 billion (stop rate 18%), and 350-day bills worth N168.04 (stop rate 18.5%).

In addition, treasury bills worth N212.85 billion were auction via primary market, viz: 91-day bills worth N45.85 billion (stop rate fell to 14.39% from 15.98%); 182-day bills worth N62 billion (stop rate fell to 17.5% from 18.17%) and 364-day bills worth N105 billion (stop rate rose to 18.42% from 18.28%).

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Steven Rich
Sep 17, 2018:
Well done

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