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Market Digest Nigeria

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CBN sells N140bn treasury bills

Central Bank of Nigeria

The Central Bank of Nigeria (CBN) last week auctioned treasury bills worth N133.79 billion via primary markets. A breakdown of the fixed income instrument showed that while it issued 91-day bills worth N32.40 billion; 182-day bills worth N35.00 billion, it also sold 364-day bills worth N66.39 billion.

On the other hand, analysts at Cowry Asset Management Limited, showed in a report that during the week, there was maturities for treasury bills and open market operations (OMO) totalling N174.33 billion- viz: 91-day bills worth N32.40 billion; 154-day bills worth N0.096 billion, 163-day bills worth N0.22 billion, 167-day bills worth N0.48 billion, 181day bills worth N0.20 billion, 182-day bills worth N25.51 billion, 358-day bills worth N49.04 billion and 364-day bills worth N66.39.
However, the Nigerian Interbank Offered Rates (NIBOR) rose for most tenor buckets. Specifically, the NIBOR for overnight funds, three months and six months tenor buckets rose week-on-week to 90.17 per cent (from 36.88 per cent), 22.12 per cent (from 21.60 per cent), and 23.29 per cent (from 23.02 per cent) respectively. But NIBOR for 1-month fell week-on-week to 20.99 per cent ( from 21.24 per cent). Elsewhere, the Nigerian Interbank Treasury Bills’ True Yields (NITTY) rose for the three months and 12 montHs maturities – as yields on the 3 months and 12 months maturities rose week-on-week to 18.71 per cent, (from 17.83 per cent) and to 17.90 per cent, (from 17.84 per cent).
However, yield on the 1-month and 6-month fell week on-week to 20.13 per cent, (from 20.70 per cent) and to 18.71 (from 19.10) respectively.
This week there will be maturing OMO totalling N17.41 billion, viz: 167-day bills worth N0.16 billion; 168-day bills worth N1.78 billion, 177-day bills worth N0.99 billion, 182-day bills worth N13.25 billion, 183-day bills worth N1.19 billion and 185-day bills worth N0.12 billion.
“As a result, we expect some improvement in the financial system liquidity with resultant fall in rates barring any further OMO auction,” it added.

Forex Market
In the forex market, the CBN continued its intervention in various segments of the interbank foreign exchange market with the sale of $195 million (same as the preceeding week). The wholesale segment of the market received $100 million, the small and medium enterprises (SMEs) segment was boosted with $50 million, while the Invisibles segment received $45 million.
Meanwhile, as at last Thursday, Nigeria’s foreign reserve stood at $33.36 billion.
Consequently, the Interbank market (NIFEX) exchange rates remained unchanged at N330/$. Similarly, the naira remained unchanged week-on-week at the parallel market. However, the naira gained 0.03 per cent to close at 360.32 at the Investors’ and Exporters’ forex window while it lost by 0.83 per cent at the BDC market to close at N363. In the forwards market, the spot remained unchanged at N305.50/$ while the 3-month, 6-month and 12-month forward contracts appreciated week-on-week by 0.09 per cent, 0.08 per cent and 0.84 per cent to N378.69/$, N398.62/$ and N427.97/$ respectively.

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For this week, analysts at Cowry Assets Management, retained their stable outlook for the exchange rate amid sustained stability in global crude oil prices which should result in further build-up in foreign reserves as well as CBN’s continued intervention in the various segments of the interbank foreign exchange market.
CBN Governor, Mr. Godwin Emefiele recently expressed optimism that fundamentals of the Nigerian economy would continue its positive momentum.
“For me, what is gratifying is that in the midst of global recovery, Nigeria itself has shown signs of recovery, especially the turnaround in the Gross Domestic Product (GDP) position, from a negative position to about 0.55 per cent. That for me shows that we are in the right position,” Emefiele had said while briefing journalists at the just concluded IMF/World Bank Annual Meetings in Washington DC.

He also revealed that some foreign direct investors were interested in investing in the country’s infrastructure as well as agriculture sectors.
Emefiele pointed out that as accretion to the external reserves continues and the economic fundamentals get stronger, the nation’s currency would definitely strengthen.
He said the central bank would continue to monitor the banks to ensure that are no threats that would alter the strategic health of the industry, “to the point where we begin to think about some threats that will distabilise the system and therefore create problems for the economy.”

He urged Nigerians living abroad to continue to remit foreign currencies to the country, just as he revealed plans to develop a policy that would link the country’s credit bureaux system to foreign borrowing.
“We are working on how to actually link our credit bureau arrangement with foreign borrowing arrangement, so that once there is a linkage between Nigeria and the foreign credit system, it is easy for them to even borrow from Nigeria and also get some form of attachment to the credit that they have abroad either in the United States or the United Kingdom. With that, it should be easy for them to access credit, then begin to build their businesses so that they can retire into Nigeria rather than retire abroad,” Emefiele said.

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Bond Market
In the just concluded week, OTC bond price appreciated specifically for the 5-year, 14.50% FGN JUL 2021 paper which appreciated by N0.31. While the 10-year, 16.39% FGN JAN 2022 decreased by N0.37. Corresponding yields for 5-year, 14.50% FGN JUL 2021 fell to 14.77% (from 14.88%) while that of 10year, 16.39% FGN JAN 2022 increased to 14.89% (from 14.77%). Elsewhere, FGN Eurobonds closed flat on the London Stock Exchange for all maturities. This week, we anticipate likely bargain hunting on the back of expected improvement in financial system liquidity.

September Inflation
For the eighth consecutive month, the rate of headline year-on-year inflation declined to 15.98 per cent in September, from 16.01 per cent posted in August, representing a 0.03 per cent points drop. According to the latest data released by the National Bureau of Statistics (NBS), the Consumer Price Index (CPI), which measures inflation increased by 15.98 per cent (year-on-year) in September 2017.The September drop was therefore the eighth consecutive decline in the rate of headline year-on-year inflation since January 2017. The NBS said increases were recorded in all Classification of Individual Consumption According to Purpose (COICOP) divisions that yield the Headline Index.On a month-on-month basis, the Headline index increased by 0.78 percent in September 2017, 0.19 percent points lower from the rate of 0.97per cent recorded in August. The percentage change in the average composite CPI for the 12-month period ending in September 2017 over the average of the CPI for the previous twelvemonth period was 17.17 per cent, showing 0.16 per cent point lower from 17.33 per cent recorded in August 2017. The urban index rose by 16.18 per cent (year-on-year) in September 2017, up by 0.05 per cent point from 16.13 per cent recorded in August and the rural index increased by 15.81 per cent in September down from 15.91 per cent in August.

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World Bank
The World Bank Group last week denied that the Bank disagreed with Minister of Finance, Mrs. Kemi Adeosun, over the borrowings by the Nigerian Government to stimulate the economy and finance infrastructure projects in the country.
In a mail to the Minister by the Senior Communications Officer of the World Bank, Mr. Rachid Benmessaoud, the Bank averred that the media misrepresented and quoted out of context the comments made by its Senior Economist for Nigeria, Gloria Joseph-Raji, at an event in Abuja.
Benmessaoud said: “On October 11th, during the launch of Africa’s Pulse, the World Bank’s biannual analysis of African economies, World Bank Senior Economist for Nigeria, Gloria Joseph-Raji, was asked by a reporter to share her views on the Federal Government’s plan to increase external borrowing. “At no point did she mention that the World Bank and the Federal Government of Nigeria (FGN) disagree on the need to rebalance the country’s debt portfolio. Where expenditures exceed revenue, governments will need to borrow. “In doing so, the Federal Government is trying to rebalance its portfolio towards more external borrowing with lower interest rates and longer maturities.” The World Bank Senior Economist was quoted by Benmessaoud to have commended the Nigerian Government’s effort to rebalance its portfolio in order to lower the cost of its borrowing, as outlined in its 2016-2019 medium term debt management strategy released last year.

Thisday

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