Release of FAAC N440 billion allocation dampens interest rates
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Inter-bank rates last week stooped with the release of N440 billion March allocations by the Federal Allocation Account Committee (FAAC).
The release of the allocation caused liquidity rise in the money market, thus fueling rise in interest rates.
But the FSDH Weekly says it expects that the current liquidity in the market will be mopped up by CBN, consequently suggesting that inter bank rates would inch up slightly in the week ahead.
It also anticipates that matured bills worth about N40 billion will hit the system in the week ahead.
The inter-bank market transactions showed that the 7-day Nigerian Inter-bank Offer Rates (NIBOR) dipped to close the week at 9.67 percent, a 133 basis point decrease from the previous week's figure of 11 percent, while the 90-day NIBOR, also dipped to close the week at 13.54 percent, a 13 basis point decrease from the previous week's figure of 13.67 percent.
At the 91-day Treasury bill auction held during the week, a total of N5.0 billion worth of bill was offered and allotted; N4.34 billion was subscribed, leading to a subscription level of 86.90 percent.
A total of N4.34 billion worth of bills was initially allotted, while N66 million was underwritten by Money Market Dealers (MMDs); the bill was issued at a discount rate of 8.15 percent which is five basis point increase from the previous week's figure of 8.10 percent.
A total of N5.0 billion worth of matured bills was repaid into the system. This balances the N5.0 billion worth of 91-day treasury bills offered, thus balancing the equation of what came in and left sold in the market.
At the 182-day Treasury bill auction, the Central Bank of Nigeria (CBN) offered a total of N35 billion worth of bill, while a total of N28.18 billion was subscribed, leading to a subscription level of 80.51 percent.
A total of N25.18 billion worth of bill was initially allotted, while N9.82 billion was underwritten by MMDs; the bill was issued at a discount rate of 9.20 percent which is a five basis point increase from the previous week's figure of 9.25 percent.
A total of N10 billion worth of matured bills were repaid into the system, resulting in a total outflow of N25 billion from this segment of the market.
The increase in the discount rates was as a result of the low subscription level the bills received.
A total of N72.65 billion worth of 7-day Reverse Repo left the system. The discount rate on the bill was 5.96 percent.
The net outflow from the primary segment of the money market was N97.65 billion.
At the secondary segment of the government securities market, total bids received in the two-way quote trading system amounted to N71 billion with tenor days ranging from 106 to 253 days.
All the bids received were allotted. The bills were issued at discount rates ranging between 8.15 percent and 9.30 percent from the previous week's range of 9.21 percent and 9.15 percent.
At the foreign exchange auction held on Monday and Wednesday, the CBN did not offer anything; however, a total of $27 million was sold. Marginal rate meanwhile, stood at N116.70/$1.
Cumulatively, the money market witnessed a net outflow of about N171.8 billion from both the government securities market and the foreign exchange market.
Though value of the Naira was stable at the official market, it depreciated in the parallel and inter-bank markets. At the official market the value of the Naira remained stable at N116.70/$1, same as the previous week's figure.
At the parallel and inter-bank markets, the value of the Naira depreciated by 20 kobo and nine kobo to close the week at N119.10/$ and N117.83/$1 from the previous week's figures of N118.90/$ and N117.74/$1 respectively. The FSDH Weekly believes that the exchange rate at the official foreign exchange market should remain stable as a result of the huge foreign reserves of the country and the managed float strategy the CBN currently employs.
The release of the allocation caused liquidity rise in the money market, thus fueling rise in interest rates.
But the FSDH Weekly says it expects that the current liquidity in the market will be mopped up by CBN, consequently suggesting that inter bank rates would inch up slightly in the week ahead.
It also anticipates that matured bills worth about N40 billion will hit the system in the week ahead.
The inter-bank market transactions showed that the 7-day Nigerian Inter-bank Offer Rates (NIBOR) dipped to close the week at 9.67 percent, a 133 basis point decrease from the previous week's figure of 11 percent, while the 90-day NIBOR, also dipped to close the week at 13.54 percent, a 13 basis point decrease from the previous week's figure of 13.67 percent.
At the 91-day Treasury bill auction held during the week, a total of N5.0 billion worth of bill was offered and allotted; N4.34 billion was subscribed, leading to a subscription level of 86.90 percent.
A total of N4.34 billion worth of bills was initially allotted, while N66 million was underwritten by Money Market Dealers (MMDs); the bill was issued at a discount rate of 8.15 percent which is five basis point increase from the previous week's figure of 8.10 percent.
A total of N5.0 billion worth of matured bills was repaid into the system. This balances the N5.0 billion worth of 91-day treasury bills offered, thus balancing the equation of what came in and left sold in the market.
At the 182-day Treasury bill auction, the Central Bank of Nigeria (CBN) offered a total of N35 billion worth of bill, while a total of N28.18 billion was subscribed, leading to a subscription level of 80.51 percent.
A total of N25.18 billion worth of bill was initially allotted, while N9.82 billion was underwritten by MMDs; the bill was issued at a discount rate of 9.20 percent which is a five basis point increase from the previous week's figure of 9.25 percent.
A total of N10 billion worth of matured bills were repaid into the system, resulting in a total outflow of N25 billion from this segment of the market.
The increase in the discount rates was as a result of the low subscription level the bills received.
A total of N72.65 billion worth of 7-day Reverse Repo left the system. The discount rate on the bill was 5.96 percent.
The net outflow from the primary segment of the money market was N97.65 billion.
At the secondary segment of the government securities market, total bids received in the two-way quote trading system amounted to N71 billion with tenor days ranging from 106 to 253 days.
All the bids received were allotted. The bills were issued at discount rates ranging between 8.15 percent and 9.30 percent from the previous week's range of 9.21 percent and 9.15 percent.
At the foreign exchange auction held on Monday and Wednesday, the CBN did not offer anything; however, a total of $27 million was sold. Marginal rate meanwhile, stood at N116.70/$1.
Cumulatively, the money market witnessed a net outflow of about N171.8 billion from both the government securities market and the foreign exchange market.
Though value of the Naira was stable at the official market, it depreciated in the parallel and inter-bank markets. At the official market the value of the Naira remained stable at N116.70/$1, same as the previous week's figure.
At the parallel and inter-bank markets, the value of the Naira depreciated by 20 kobo and nine kobo to close the week at N119.10/$ and N117.83/$1 from the previous week's figures of N118.90/$ and N117.74/$1 respectively. The FSDH Weekly believes that the exchange rate at the official foreign exchange market should remain stable as a result of the huge foreign reserves of the country and the managed float strategy the CBN currently employs.
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