Steady Liquidity, Steady Rates

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With a steady liquidity boost, interbank rates stabilised below the Monetary Policy Rate (MPR) of 12 per cent for active tenors in March while the monetary authority became more strategic in its liquidity management drive.

According to the Financial Market Dealers Association (FMDA), robust liquidity levels in excess of N320 billion in daily net opening cash balances of deposit money banks ensured rates closed the first week of March at 10.24, 10.59 and 11.04 per cents for call, 7 days and 30 days respectively despite net outflows of N64.63 billion from treasury bills and N59.95 billion WDAS debit.

Rates however inched up slightly in the second week at 10.33, 10.63 and 11.04 per cent for call, 7 days and 30 days respectively following moderation in liquidity levels as outflows via N56.07 billion Foreign Exchange purchases via the WDAS window, N60 billion NNPC withdrawal and N70 billion bond purchase outweighed net inflows of N20.12 billion from OMO bills.

By the third week of the month, cost of funds tilted northward further to 10.75, 11.13 and 11.54 per cents for call, 7 days and 30 days respectively following strategic liquidity mop-up through N437.63 billion Special OMO bills and N106.74 billion PMA sales with N108.67 billion WDAS debit as net opening cash balance of deposit money banks peaked at N693.78 billion on inflows from N283.23 billion FAAC fund disbursement and matured treasury bill repayments of N354.61 billion.

NIBOR closed the month slightly lower in the fourth week at 10.29, 10.54, and 10.92 per cents for call, 7 days and 30 days respectively, as liquidity inflows from N354.72 billion matured treasury bills minimised the effects of outflows via N308.32 billion treasury bills sales and WDAS debits of N89.81 billion.

The Federal Accounts Allocation Committee (FAAC) appropriated the sum of N445.78 billion, being the statutory allocation from the total sum of N886.40 billion shared among the three tiers of government for the month of February shared in March against N575 billion for the month of January shared in February 2013.

The allocation represents a decrease of 28.98 per cent relative to February’s. From this amount, the sum of N286.23 billion, representing the allocation to states and local governments was posted into the system against N286.88 billion in the previous month reflecting a decrease of 0.23 per cent owing to shortfalls in statutory gross revenue for the month.

The deposit taking and lending rate of Deposit Money Banks (DMBs) also inched up slightly compared to the rates reported in the preceding month. Savings figures averaged 2.0846 per cent while other tenured funds ranged between 4.2917 per cent – 9.0893 per cent for overnight to 364 days money.

For the lending rates, prime structured loan and normal structured loan stood at monthly average of 18.0625 per cent and 22.1876 per cent respectively in March. Rates moved up marginally in response to need for deposit mobilisation and slight uptick in loans administration cost.

At the debt market, a total of N70 billion was raised in March relative to N105 billion borrowed the preceding month, reflecting a marginal decrease of 33.33 per cent. The Bond maturities were re-openings of two previous issues, 15.10 per cent FGN APR 2017 (5-Year original tenor) and the 16.39 per cent FGN JAN 2022(10-year original tenor).

Total public subscription for the two bonds in the month amounted to N132.18 billion as against N251.91 billion in February. The successful bids that ranged between 9.5000 – 13.0000 per cents for the instruments were allotted at the stop rates of 10.7000 and 11.0800 per cents for 15.10 per cent FGN APR 2017 and 16.39 per cent FGN JAN 2022 respectively.

Marginal rates of the re-opened instruments rose slightly by 3bps and 28bps respectively over last month as a result of lower participation by foreign institutional investors while local players’ interest was not strong enough to move marginal rate southward despite robust liquidity levels at the domestic front.

The FMDA says it expects the naira to rebound and retain its strength against the dollar on the back of further accretions to external reserves coupled with near term improvement in foreign exchange inflow into the fixed income market.

Foreign external reserves position have continually strengthened averaging $48.18 billion to sustain the 31-month high of $46.70 billion recorded in February 2013. Available data showed that month end position stood at $48.57 billion. This figure is higher than the $34.75 billion it recorded in the corresponding period of last year and $1.19 billion or 2.51 per cent higher than the $47.38 billion end-February.

According to the FMDA, “At the current level, the reserve proves sufficient to finance over 12 months of imports, higher than the conventional threshold of three months in view of reduction in fiscal deficits. The steady accretion reflects continued increase of proceeds from crude oil and gas sales and crude oil related taxes following steady crude oil prices coupled with moderate foreign exchange inflows from energy companies and offshore investors trading in debt market.”


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