CBN injects $321m, CNY 33.3m into retail SMIS as Naira depreciates at Parallel market

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Story by Kayode Tokede

The Central Bank of Nigeria says it has made another intervention in the retail secondary market intervention sales to the sum of $321.1 million.

The director, corporate communications department , CBN, Mr. Isaac Okoroafor also added that the sum of 33.3 million Chinese yuan was also offered in the spot and tenured forwards segment of the inter-bank foreign exchange market.

The U.S dollar intervention was for requests in the agricultural and raw materials sector while the Chinese yuan was for Renminbi denominated letters of credit.

The foreign reserves declined by $54.44 million Week-Till-Date (WTD) to $43.19 billion (September 4, 2019).

Nonetheless, the naira depreciated by 0.20per cent week-on-week (w/w) to N362.11 against the Dollar at the Investors & Exporters Foreign Exchange (I&E FX) window but closed flat at NGN360.00/Dollar at the parallel market.

Elsewhere, total turnover at the I&E window decreased by 21.1per cent WTD to $902.57 million, with trades executed within the N357.50-364.00/Dollar band.

Meanwhile, the Overnight (OVN) rate remained tethered in the single-digit territory through last week as liquidity levels were boosted by Open Market Operation (OMO) maturities.

Consequently, the overnight lending rate settled at 3.86per cent, representing a decline of 6.64ppts w/w.

On the first trading day last week, the rate settled at 9.86per cent, lower from the previous week’s close of 10.50per cent.

Thereafter, the OVN rate declined by 0.93ppts to 8.93per cent before marginally rising by 0.57ppts on the next trading day.

However, on the penultimate trading day of the week, as maturities amounting to N563.82 billion hit the system, the rate declined by 4.36ppts to settle at 5.14per cent.

Activities in the Treasury bills (T-Bills) market were seemingly bullish as the average yield pared by 52basis points to settle at 13.33per cent.

The CBN held an OMO auction on the September 5th for instruments worth N332.60 billion – the 84DTM (N0.64 billion), 189DTM (N0.48 billion), and 364DTM bills (N322.60 billion) were sold at respective stop rates of 11.59per cent (same as the previous auction), 11.79per cent (same as previous auction), and 13.50% (previously 12.50per cent).

Also, the CBN will be holding a PMA on the September 12, for instruments worth N158.65 billion – 91DAY (N15.00 billion), 182DAY (N14.00 billion), and 364DAY (N129.65 billion).

According to analysts at Cordros Capital, “In the coming week, we expect the CBN to hold multiple auctions to mop-up the maturities expected in the week.

“Consequently, we expect yields to further temper in the secondary market, as investors take advantage of higher yields on some mid-tenor instruments trading in the market, as opposed to participating in the OMO or PMA.”

 

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