Loans from the Central Bank of Nigeria (CBN) to banks dropped by 6.7 per cent to N1.8 trillion last week.
LEADERSHIP can authoritatively reveal that lending to banks through the CBN’s Standing Lending Facility (SLF) dropped from N1.9 trillion the previous week to N1.8 trillion at the close of business last week Friday.
This implies that few banks last week depended on the apex bank loans to meet their cash obligations, following the illiquidity in the banking system.
However, the money market rate has crashed in the past two consecutive weeks, coming from as high as 66.83 per cent to 4.75 per cent on the heels of CBN weekly intervention.
Compared to last week, the overnight rate declined by 24.92 per cent week-on-week, broadly validated by an improvement in system liquidity, which moved from a deficit of N207.19 million, to a positive balance of N153.62 million.
Experts at Cordros capital, a Lagos based research firm, attributed last week’s movement in the overnight rate to a deluge of inflows, in particular to a bond maturity totaling N480.13 billion and cash injections from monthly budgetary allocation worth N407.81 billion.
“The overnight rate was less sensitive to the debits for foreign exchange sales totaling $803.43 million and a net Open Market Operation (OMO) outflow of N178.96 billion”, they explained.
On foreign exchange, they noted that CBN sold approximately $803.43 million at the interbank window, through spot $3.14 million delivery and $429.09 million forward contracts, $246.20 million Small Medium Enterprises and Invisibles channel, $100 million authorized dealers, and the $25 million Investors & exporter’s market.
On this week’s outlook, they said, “While we look for continued stability of the NGN at the interbank market, we expect further interventions to temper the naira weakness parallel segment next week.
“We expect demand to remain healthy in the coming week, as the impact of improved system liquidity lingers, coupled with additional inflow of N62.98 from maturing OMO bill. Meanwhile, at next week’s NTB auction, the apex bank will offer N150.61 billion across the 91-day (N45.18 billion), 182-day (N23.43 billion), and 364-day (N82.00 billion) bills.
“We look to a northward movement in rates in the coming week, owing to one, debit for foreign exchange sales and two, further OMO auctions to mop up both existing liquidity and the maturing N62.98 billion worth of OMO bills”.
CBN To Inject More Funds Into Inter-bank Market
Meanwhile, as the inter-bank forex market resumes after the Workers’ Day holiday, there are strong indications that the Naira is set to appreciate this week as the Central Bank of Nigeria (CBN) commences another round of forex injections into the invisible segment of the market.
Industry experts are of the view that the rate of forex liquidity being pumped into the system by the CBN will lead to a depreciation of the dollar against the naira.
The CBN acting director of Corporate Communications, Isaac Okorafor, in a chat with business correspondents at the weekend confirmed moves by the apex bank to inject more foreign exchange into the inter-bank segment of the market.
He said it was in line with the commitment of the CBN governor, Godwin Emefiele, to ensure that those who had legitimate need for foreign exchange were guaranteed access to it.
While stressing that the actions of the bank were in sync with its mandate of safeguarding the value of the local tender, Okorafor said the CBN remained determined to achieve a convergence of the rates in the interbank and Bureau de Change segments.
With the latest policies of the CBN, which cater specifically for SMEs, exporters and importers, market analysts are of the strong view that the Naira will firm up against other major currencies when trading commences this week.
Speaking at the weekend, frontline entrepreneur, Tony Elumelu also disclosed that global investors were excited about the forex policies of the CBN which, he stressed, had brought predictability to the forex market.