Interbank rates rise, defy N44b coupon payments, OMO maturity

Parallel forex market stable at N325/$

The interbank lending rates- Open Buy-Back (OBB) and overnight trended upward throughout last week, closing 4.8 per cent and 5.3 per cent respectively at the weekend.

Curiously, the trend defied the N44.3 billion coupon payment on the Federal Government’s 2024 bond, which raised system’s liquidity.

The rates, though declined to 5.3 per cent (OBB) and 5.8 per cent for overnight on Thursday, from 7.1 per cent and 7.5 per cent respectively, had remained high, despite the Open Market Operations (OMO) and treasury bills’ maturities worth N45.5 billion and N172 billion each.

Liquidity levels dropped further on Friday as commercial lenders scrambled for funds to settle bond purchases and bids for short-dated treasury bills on offer at the OMO window.

Government had at the middle of last week, raised N125 billion worth of bonds with maturities ranging between five and 20 years, with settlement due on Friday, while N166.58 billion worth of treasury bills were issued at the primary market too.

Although the two interbank instruments ended the week on a better rate compared to the previous week’s 5.1 per cent and 5.6 per cent, rising by 1.9 per cent and two per cent when measured on week-on-week basis respectively, analysts had predicted the trend.

The Head of Investment Research at Afrinvest Securities, Ayodeji Eboh, in a note at the weekend, said: “As expected, money market rates trended higher at the start of the week consequent on lower liquidity levels in the system from the levels at the close of the previous week, but steadily declined in the days leading to the end of the week.

“On Monday, OBB and Overnight rates closed at 7.4 per cent and 7.9 per cent respectively. However on Tuesday, liquidity levels rose by about N44.3 billion the back of coupon payment on the FGN2024 bond and as a result, money market rates declined as the OBB and Overnight rate fell to seven per cent and 7.7 per cent respectively.

“Money Market rates hovered around the same level on Wednesday as OBB rates inched four basis points (bps) higher while Overnight rates declined 18bps to close at 7.1 per cent and 7.5 per cent respectively.”

“We expect the interbank rate to rise slightly by the middle of this week when banks are expected to make provision for foreign exchange purchase at the central bank by Tuesday, but could ease toward the weekend after budgetary allocation disbursement,” another trader said.

The treasury bills market was broadly bearish last week, as average rates trended higher than previous week’s level, on the back of low liquidity, which tightened as banks make cash provisions for foreign exchange auction by the Central Bank of Nigeria.

Meanwhile the foreign exchange market maintained relative calmness last week as all look up to the outcome of the Monetary Policy Committee meeting due to begin today.

However, the Naira/Dollar exchange rate at the CBN and Interbank remained at N197/$ and N199.5/$ respectively throughout the week.

Also activities in the parallel market witnessed stability through week, as the local unit exchanged for N324/$ from the beginning of the week and appreciated by N2 on Thursday to close at N322/$.