WEDNESDAY, 23 JUNE 2010 01:12ÂÂÂ
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Efforts by government agencies to address problems associated with lending and the naira value have so far worked in the official markets, but little ripple effects are seen in real terms of it or what some also refer to as unofficial markets.
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For instance, the disbursement of about N207 billion by the Federation Accounts Allocation Committee (FAAC) last week to the three tiers of government drove inter-bank lending rates down significantly. Available data show that the call rate dropped by 448 basis point to close at 1.1917 percent, 7-day Nigerian Inter-Bank Offer Rate (NIBOR) closed the week at 2.50 percent, a 446 basis point decreased from the previous week’s figure of 6.96 percent, while the 90-day NIBOR closed the week at 6.79 percent, a 167 basis point decrease from the previous week’s figure of 9.46 percent.
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But these steep dips in inter-bank lending rates failed to translate into any reasonable drop in terms of real lending. Real lending – prime and normal – have remained in the neighbourhood of between 17 and 20 percent in the last few months.The situation was the same at the foreign exchange (forex) market last week. The Central Bank of Nigeria (CBN) in a move geared towards ensuring stable forex rate upped supply from $600 million it offered the previous week to $700 million last week.
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At the forex auction held Monday, June 14, 2010, the CBN offered a total of $400 million, and demand stood at $383.70 million, representing 95.93 percent of what was offered, while the sale was same as the demand. On Wednesday, June 16, 2010, the CBN offered $300 million, while demand stood at $273.47 million, representing 91.16 percent of what was offered, and the sale was same as the demand. During the week, a total of $700 million was offered, compared with $600 million the previous week, while $657.18 million was sold, same as the demand, representing 93.88 percent of the offer.
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Inspite of the increase, the value of the naira only appreciated at the official market, depreciated at the inter-bank, while it was stable at the parallel market segment of the forex market. At the official segment of the forex market, value of the naira appreciated by 18 kobo to close at N148.71/$, compared with N148.89/$ in the previous week. At the inter-bank segment of the forex market, the value of the naira depreciated by 37 kobo to close at N151.60/$ from the previous week’s figure of N151.23/$; while at the parallel market, the naira was stable at N153.50/$.
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Meanwhile, at the 91-day Treasury Bill (TB) auction, a total of N18.70 billion worth of securities was offered and sold. The bill was 129.60 percent subscribed as N24.23 billion worth of bid was received, though the bill was issued at a discount rate of 2.50 percent. At the 182-day TB auction, a total of N40 billion worth of securities was offered and sold, while it was 158.13 percent subscribed as N63.25 billion worth of bid was received.
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The bill was issued at a discount rate of 3.51 percent. A total of N30 billion worth of matured bills was repaid into the system, resulting in a net outflow of N10 billion from this segment of the market. The CBN continued with its mop up activities during the week as it withdrew about N28.70 billion through the Open Market Operations (OMO). In all, this week, there was a net total outflow of N44.70 billion from the primary and secondary segments of the government securities market.
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The FSDH Weekly noted that inspite of the fact that there would not be any maturities from government securities to be paid into the system this week; it expected the market to remain relatively liquid due to the FAAC allocation that came in during the week. On the other hand, it expects the forex rate to remain stable as the CBN meets all genuine demand.
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(Source:BusinessDay)
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