Nigeria’s money market rate may drop as Open Market Operation (OMO), and Treasury bills maturities worth N443.7 billion are expected to hit the financial market this week (next week).
The inflows are expected to enhance the banking system liquidity, which stood at N187.0 billion on Thursday last week.
A breakdown of the inflow as seen in a report by Afrinvest Securities Limited showed that N352.8bn will flow from OMO maturity while N90.9m will come from the Nigerian treasury bills.
The overnight (OVN) inter-bank rate, the rate at which Deposit Money Banks (DMBs) borrow and lend to each other declined by 4.27 basis points to 9.83 percent on Thursday.
Also, the Open Buy-Back (OBB), the money market instrument used to raise short-term capital, declined by 4.17 basis points to 8.83 percent on the same day.
Analysts at Afrinvest noted that in the secondary T-bills market last week, performance was flattish as average yield remained at 3.2%. Yields on all instruments remained unchanged, indicating tepid demand during the week.
Despite a moderation in system liquidity on Monday to N118.7bn (vs. N382.4bn on June 5, 2020), the OBB and OVN rates opened the week lower at 14.5% and 15.4% respectively from last week’s close of 15.6% and 16.7%. On Tuesday, the OBB and OVN rates remained flat despite weaker system liquidity at N107.4bn. On Wednesday however, the OBB and OVN rates fell to 13.0% and 14.1% respectively, reflecting an increase in system liquidity to N139.2bn. Finally, the week closed on Thursday with the OBB and OVN rates settling lower at 8.8% and 9.8% respectively as system liquidity closed higher at N187.0bn.
On Wednesday, the apex bank conducted a primary market auction, offering a total of N90.9bn across the 91-day (N1.8bn), 182-day (N4.5bn) and 364-day (N84.6bn) instruments. Overall, the auction was oversubscribed at a bid to offer ratio of 1.9x. Furthermore, demand was strongest in the shorter end as offer was oversubscribed by 12.0x. In the same vein, the 182-day and 364-day instruments received subscriptions exceeding offers by 9.0x and 1.4x respectively. Total sale stood at N90.9bn while marginal rates declined across board to 2.00%, 2.20% and 4.02% from 2.45%, 2.72% and 4.02% for the 91-day, 182-days and 364-days instrument respectively. This represents a decline of 32bps as average rates fell to 2.74% from 3.06% recorded in the previous auction.
On Thursday, the CBN offered a total of N60.0bn worth of OMO securities across the 89-day ((N5.0bn), 180-day (N5.0bn) and 348-day (N50.0bn) instruments. Overall, the auction was oversubscribed at 1.13x. The shorter-dated instrument recorded the highest bid to offer ratio at 2.2x while the 180-day and 348-days securities were also oversubscribed at 1.1x and 1.03x respectively. Instruments worth N60.0bn were sold and the closing rates remained the same as the previous auction at 4.95%, 7.79% and 8.99% for the 89-day, 180-day and 348-day instruments respectively.
At the foreign exchange market, naira remained stable at N448 and N450 against the dollar on the black market and retail bureau respectively.
The Central Bank of Nigeria (CBN) resumed FX sales this week, offering a total of $100.00 million via the Secondary Market Intervention Sales (SMIS) Wholesale Window. Meanwhile, the external reserves declined, down 0.2% (US$82.3m) to US$36.5bn from US$36.6bn last week. The prospect for accretion in reserves remained weak as oil prices moderated to US$37.72/bbl. from $39.0/bbl last week.
