CBN to resume liquidity mop-up, interbank market receives N425bn

The Central Bank of Nigeria (CBN) is expected to resume its liquidity mop up operations this week in response to inflow of N424.9 billion into the interbank money market.

Last week the apex bank suspended liquidity mop-up by withholding Open Market Operation (OMO) treasury bills, though it conducted sale of Primary Market (fresh) treasury bills worth N180.9 billion.

The market received inflow of N424.9 billion from matured treasury bills (TBs) on Thursday comprising N180.9 billion worth of matured OMO bills and N244 billion worth of matured primary market bills. This resulted into net inflow of N244 billion, which boosted market liquidity at the end of the week and prompted moderation in cost of funds.

Data from FMDQ showed that interest rate on Collateralized (Open Buy Back, OBB) lending fell by 116 basis points (bpts) to 3.67 percent on Friday from 4.83 percent the previous week.

Similarly, interest rate on Overnight lending dropped by 1.48 percent to 4.25 percent on Friday from 5.73 percent the previous week.

Analysts, however, projected that this trend will be reversed this week, as they expect CBN to conduct liquidity mop-up against the inflow from maturing TBs.

According to analysts at Lagos-based Afrinvest Limited: “In the coming week, we expect the CBN to conduct OMO auctions in line with system liquidity, thus driving money market rates higher.”

Meanwhile, the nation’s external reserves rose by $202 million in three days last week, thus reversing the three weeks downward trend from May 18th to June 7th.

Data from the CBN showed that the external reserves rose to $47.627 million on Wednesday last week from $47.425 million on Friday June 7th, implying $202 million increase in three days.

In another development, the CBN increased its weekly intervention in the interbank foreign exchange market to $553.06 million.

On Monday the apex bank intervened with $210 million, allocating $210 million to wholesale segment, $55 million to SME window and another $55 million for invisibles.

On Thursday the CBN injected another $343.06 million through the Retail Secondary Market Intervention Sales (SMIS).

Acting Director, Corporate Communications Department, CBN, Mr.  Isaac Okoroafor said that the SMIS injection was for requests in the agricultural, airlines, petroleum products and raw materials and machinery sectors.

He added that the continued intervention were in line with the assurances made by the Governor of the Central Bank of Nigeria, Mr Godwin Emefiele, to sustain market liquidity in order to boost production and trade and maintain stability in the forex market.

Speaking further, Okoroafor assured that the CBN remained very committed to ensuring that all the sectors continue to enjoy access to the foreign exchange required for the business concerns.

However, the Naira recorded mixed performance in the foreign exchange market last week. In the parallel market the Naira appreciated by 40 kobo as the exchange rate for the market dropped to N360.6 per dollar on Friday from N361 per dollar the previous week.

The Naira, however, depreciated by 16 kobo in the Investors and Exporters (I&E) window as the indicative exchange rate rose to N361.07 per dollar on Friday from N360.91 per dollar the previous week.

The depreciation of the Naira in the I&E window followed a sharp decline in the volume of dollars traded (turnover) last week.

A Financial Analysis of daily transactions showed that turnover dropped by 40 percent to $787.19 million last week from $1.36 billion the previous week.