FAAC injection, T-bills to drive down inter-bank rates this week
Liquidity in the money market is expected to improve this week on the back of injection from Federation Accounts Allocation Committee (FAAC) allocation and settlement of maturing N153.6 billion treasury bills.
This is expected to bring down inter-bank rates, which are the rates at which banks borrow from each other, as naira is expected to sustain its stability.
“Our short to mid-term outlook for the market remains moderately bullish as we expect investors to further re-price financial assets based on lower political risk and the recent stability in the forex market”, analysts at Afrinvest said.
Liquidity within the market surged last week hence average money market rates for the week dropped to 8.3% for the Open Buy Back rate (OBB) and 9.0% for the overnight rate relative to previous week’s 15.1% and 16.2%, respectively. This was driven by bonds maturity worth N535.0 billion which hit the system.
Liquidity level further increased on Tuesday with an opening balance of N812.2 billion while Standing Lending Facility (SLF) accessed from the CBN by the deposit money banks (DMBs) closed at N91.0 billion. As such the OBB and Overnight rates declined marginally to 8.0% and 8.8%, respectively.
On Wednesday, however, liquidity opening balance declined to N712.7 billion, pushing money market rates higher to 8.6 percent (OBB) and 9.3 percent (Overnight). This decline in liquidity was as a result of OMO auctions during the week (Monday and Wednesday worth N268.0 billion and N331.4 billion apiece).
Amid net inflow of N93.4 billion on Friday from the OMO auction worth N258.0 billion and OMO maturity of N351.4 billion, the OBB and Overnight rates closed the week lower at 8.3 percent and 8.8 percent, respectively. In the coming week, liquidity level is expected to increase slightly as T-bills worth N150.6 billion and FAAC allocation for March are anticipated to hit the system.
At the foreign exchange market, despite dollar auction sales worth US$91.2 billion by international oil companies on Monday, the naira closed flat at N199.10/US$1.00 at the interbank market. This rate was maintained throughout the week.
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