Cost of borrowing may rise this week if the Central Bank of Nigeria continues its hostile mop in the market.
The central bank sold sizeable worth of treasury bills through open market operations last week to reduce the impact of the release of budgetary allocations to government agencies on the economy.
“We expect the cost of borrowing to trend up next week if the central bank continues to aggressively mop up liquidity through (open market operations),” another trader told Reuters.
FSDH Securities said a total of about N100 billion personnel and overhead costs hit the system last week, but was however not enough to douse the tightness in the market as there was a total net withdrawal of about N335.60 billion from the system via the sales of government securities and foreign exchange auctions by the Central Bank of Nigeria (CBN) during the week.
Available data showed that 7-day Nigerian Inter-Bank Offer Rate (NIBOR) closed the week at 16.67 per cent, a 4 basis points increase from the previous week’s figure of 16.63 per cent, while the 90-day NIBOR closed the week at 17.29 per cent, a 21 basis points decrease from the previous week’s figure of 17.50 per cent.
At the 91-day Treasury Bill (TB) auction, a total of N37.49 billion worth of securities was offered and sold to competitive bidders while a total of N12.25 billion was sold to non-competitive bidders, bringing total offer and sale to N49.74 billion.
The bill was 122.02 per cent subscribed as N45.74 billion worth of bid was received from competitive bid. The bill was issued at a discount rate of 14.09 per cent, higher than 14 per cent as at the last auction. A total of N37.49 billion worth of matured bills was repaid into the system, leading to a net outflow of N12.25 billion from this segment of the market.
At the 182-day TB auction, a total of N45.73 billion worth of securities was offered and sold to competitive bidders, while N11.51 billion was sold to non-competitive bidders, bringing total offer and sale to N57.24 billion. The bill was 116.58 per cent subscribed as N53.31 billion worth of bid was received from competitive bidders. The bill was issued at a discount rate of 16.20 per cent, higher than 15.95 per cent as at the last auction.
A total of N45.73 billion worth of matured bills was repaid into the system, leading to a net outflow of N11.51 billion from this segment of the market. At the 364-day TB auction, a total of N47.03 billion worth of securities was offered and sold to competitive bidders, while N6.52 billion was sold to non-competitive bidders, bringing total offer and sale to N53.54 billion.
The bill was 114.08 per cent subscribed as N53.65 billion worth of bid was received from competitive bidders. The bill was issued at a discount rate of 16.75 per cent, higher than 16.41 percent as at the last auction. A total of N40 billion worth of matured bills was repaid into the system, leading to a net outflow of N13.54 billion from this segment of the market.
At the Open Market Operations (OMOs) and Repurchase (REPOs) transactions held during the week, there was a total inflow of about N31.92 billion into the system, while there was a withdrawal of about N287.53 billion from the system. This brought about a net outflow of N210.33bn into this segment of the market. The transactions were traded at a discount rate range of 14.99 per cent-16.98 per cent.
At the foreign exchange auction held on Monday, December 19, 2011, the CBN offered a total of $200 million, while demand stood at $217.77 million, representing 108.89 per cent of what was offered. The total sale was the same as the amount offered, representing 91.84 per cent of demand.
At the foreign exchange auction held on Wednesday, December 21, 2011, the CBN offered a total of $200 million, while demand stood at $218.08 million, representing 109.04 per cent of what was offered. The total sale was the same as the amount offered, representing 91.71 per cent of demand. In all, a total of $400 million was offered and sold, while demand stood at $435.85 million, representing 108.96 percent of the total offer, and the amount sold was same as the amount offered, representing 91.77 per cent of amount demanded.
Cumulatively, there was a net total outflow of N355.60 billion from the system through the government securities market during the week. The value of Naira was stable at the official market, but depreciated at both the inter-bank and parallel segments of the foreign exchange market during the week. At the official market the value of Naira was stable at N156.70/$.
At both the inter-bank and parallel markets, the value of Naira depreciated by 260 kobo and 150kobo to close at N164.30/$ and N165/$ from the previous week’s figures of N161.70/$ and N163.50/$ respectively.
The FSDH Weekly expects repayment of TB maturity this week amounting to about N69.46 billion (91-day TB – N19.10 billion and 182 day TB – N50.35 billion).
“We still expect that CBN would continue to employ monetary tightening tools to adjust the level of liquidity in the system. Consequently, we expect that inter-bank rates would inch up in the coming week, if the statutory allocations for October and December did not hit the system during the week”, experts at FSDH said