- Naira depreciates to N475/$ in parallel market
The sharp increase in cost of funds in the interbank money market last week will be reversed this week in response to liquidity inflow of N181 billion even as the Debt Management Office (DMO) auctions N150 billion worth of FGN bonds.
Cost of funds rose sharply last week following outflow of N45.36 billion on Thursday through the secondary market (Open Market Operation, OMO) treasury bill auction conducted by the Central Bank of Nigeria (CBN) on Thursday.
The outflow which offset the impact of N87 billion inflow from matured OMO TBs earlier in the week, prompted interest rate on Collateralised (Open Buy Back, OBB) lending to rise by 1,127 basis points (bpts) to 17. 6 percent at the close of last week from 6.33 percent the previous week. Similarly, interest rate on Overnight lending rose by 1,263 bpts to 19.8 percent from 7.17 percent the previous week.
Analysts, however, projected that this trend will be reversed this week due to inflow of N181.36 billion from maturing OMO TBs.
“In the coming week, we expect high liquidity from maturing OMO bills and T-bills to drive rates lower in the secondary market”, said analysts at Afrinvest Securities Limited.
Similarly, analysts at Cowry Asset Management Limited said “In the new week, treasury bills worth N181.36 billion will mature via OMO; hence, we expect interbank rates to moderate given the relatively huge number of maturing T-bills.”
On the N150 billion FGN bond auction to be conducted by the DMO this week, the Cowry Asset analysts further moderation in stop rate and amidst heavy demand.
They said: “In the new week, DMO will issue bonds worth N150 billion, viz: 12.50% FGN APR 2026 (10- Yr re-opening) worth N25 billion, 12.50% FGN APR 2035 (15-Yr re-opening) worth N40 billion, FGN JUL 2045(25-Yr New Issue) worth N45 billion and 12.98% FGN APR 2050 (30-Yr Re-opening) worth N40 billion respectively. We expect the bonds stop rates to moderate amid demand pressure.”
On the foreign exchange, the naira, last week, depreciated further against the dollar by N3 in the parallel market.
According to naijabdcs.com the exchange rate platform of the Association of Bureaux De Change Operators of Nigeria (ABCON), the parallel market exchange rate rose to N475 per dollar last week from N473 per dollar the previous week as scarcity of dollars intensify amidst scant supply.
The naira was however stable N383 per dollar in the Investors and Exporters (I&E) window last week.
