CBN to Mop-up N126bn from Circulation

By Obinna Chima


The Central Bank of Nigeria (CBN) will this week mop up a total of N125.79 billion from circulation as part of its Open Market Operations (OMO). The move according to market sources, is to sustain price stability in the system amidst the rising threats of inflation.



The regulator had announced last Thursday that it would issue 91-day, 182-day and 364-day Treasury Bills this week. A breakdown of the figure made available showed the apex would issue N30 billion in 91-day bills, N45.79 billion in 182-day bills and N50 billion in 364-day bonds, using the Dutch Auction System this Thursday. It said that the outcome of the auction would be released last Friday.



However, as predicted the preceding week, inter-bank rates nosedived last week, following the distribution of funds by the Federation Accounts Allocation Committee (FAAC) last week. Nigerian inter-bank lending rates fell to 8.50 per cent on average last week from 9.16 per cent the preceding week. The naira maintained its strength at the Wholesale Dutch Auction system (WDAS) market. The FAAC funds also triggered shifts in bond yields last week.Analysts said the injection from FAAC cushioned the withdrawal of about N204.99 billion from the system via the government securities market and the foreign exchange auction market during the week.



But analyst at the FSDH predicted that with the maturity of about N72.23billion from the Federal Government securities this week, there may also be some degree of withdrawals from the market. They also expect the market to remain slightly tight this week. “But the tightness may not be sufficient to alter the inter-bank rate from the current levels. In the foreign exchange market, the ability of the CBN to meet genuine demand in the market should keep foreign exchange rate stable at the current level,” FSDH added.



Inter-bank Rates Movement



As stated earlier, the Nigerian Inter Bank Offer Rates (NIBOR) reduced last week as a result of an inflow from the FAAC.The overnight (call) tenor dropped to 5.29 per cent last Thursday, representing a decrease by 0.44 per cent over last Monday’s figure of 9.46 per cent, while the 7-days tenor shed 0.28 per cent, from the 9.96 per cent achieved last Monday to 7.21 per cent last Thursday. Whereas the 30-days cost of funds closed at 9.25 per cent last Thursday, reflecting a drop by 0.17 per cent over last Monday’s figure of 11.17 per cent, the 60-days placement period dropped to 10.75 per cent last Thursday, representing a slide by 0.11 per cent, compared with last Monday’s figure of 12.12 per cent. In the same vein, just as the 90 days placement period also fell by 0.09 per cent, from 12.97 per cent last Monday, as against the 11.75 per cent it achieved on Thursday, the 180-days tenor dipped by 0.08 per cent, to 12.50 per cent last Thursday, over the 13.54 per cent it stood last Monday. The one-year cost of funds also reduced to 13.21 per cent on Thursday, reflecting a decline by 0.05 per cent, compared with last Monday’s figure of 13.93 per cent.



Both the value for bank and discount houses Open Buy Back (OBB) also dropped last week. While that for banks shrank to 4.29 per cent last Thursday, as against the 8.29 per cent it stood at the beginning of last week, the OBB value for discount houses also fell from 8.25 per cent last Monday, to 4.17 per cent on Thursday.  But as at Friday, the secured Open Buy Back (OBB) eased to 8.0 per cent from 8.50 per cent, 175 basis points above the CBN’s 6.25 per cent benchmark rate. The call tenor dropped to 8.5 per cent from 9.0 per cent.Trader attributed the rally observed in the NIBOR on the last market day of last week to debiting of funds traded from bonds.


Forex Transactions



At the CBN regulated Wholesale Dutch Auction system (WDAs) market last week, the regulator met $3.7 million above the total foreign exchange demanded, as it sold a total of $250 million at N149.96 to the dollar, out of $253.7 million demanded. It also sold a total of $297.24 million at N149.95 last Monday. The naira firmed against the United States dollar last week following reports that energy firms sold hard currency to some lenders.



Traders said the Nigerian Liquified Natural Gas company and the local unit of Chevron sold a total of $28.3 million to some lenders last Tuesday and Wednesday, which helped to raise liquidity and provide support for the naira last week.Report from the Financial Market Dealers Association (FMDA) showed the value of Naira appreciated in all the three segments of the foreign exchange market last week. At the parallel market, the naira improved by 50 kobo to close at N153.50 to the dollar, compared to the preceding week’s figure of N154.00 to a dollar. At the inter-bank market, the Naira advanced by 8 kobo to close at N152.23 to a dollar, as against the preceding week’s figure of N152.31 to a dollar. Also, at the official market, the naira gained 3 kobo to close at N148.96 to a dollar, over the preceding week’s figure of N149.01 to a dollar.


Other Mkt Devts

Provisional Licences for 121 MFBs


The CBN last week granted provisional approval for new licences to 121 out of the 224 microfinance Banks (MFBs) whose licences was revoked earlier.The apex bank said the MFBs who got the provisional approvals are those that had made fresh injection of capital and made significant loan recovery, as confirmed by a recent capital verification exercise.



It noted that the requirements for the grant of new operating licence to the 121 MFBs included the capitalisation of prior deposits for shares and the new capital injection to bring the shareholders’ fund to the prescribed minimum balance of N20 million. It also stated that the banks have been given a time frame to install good corporate governance, sound risk management system and strong internal controls.But it stressed that the closure of the remaining 103 MFBs will immediately be brought to conclusion by the Nigerian Deposit Insurance Corporation (NDIC) and the process of liquidating the affected banks.



The banking watchdog revealed that it had taken other measures to ensure that the MFBs live up to their objectives of fostering financial inclusion, fighting poverty and empowering low-income and vulnerable groups. It also warned operators to play by the rules and comply with the appraisal guidelines, prudential requirements and extant laws to be allowed to remain in the system.


FG Auctions N123bn Bonds



The Federal Government sold a total of N122.93 billion ($820 million) bonds at its 10th debt auction of the year, the Debt Management Office (DMO) said last Thursday.The securities sold included a 20-year, 7-year and 3-year sovereign bonds as the various fixed instruments that were auctioned by the DMO. It explained that N58.76 billion were sold in the 20-year, N37.50 billion in the 7-year and N26.67 billion in the 3-year instruments at last Wednesday’s auction, adding that all the instruments are re-openings of previous issues.



The marginal rate on the 3-year bonds rose to 10.50 per cent from 8.43 per cent last month, that of the 7-year paper was 11 per cent, while the 20-year bond rate climbed to 14 per cent from 12.53 per cent. But the original coupon rates of 5.50 per cent, 9.25 per cent and 10 per cent for the 3-year, 7-year and 20-year respectively would be maintained, the DMO had revealed.


FAAC’s N412bn Revenues for Sept



The Federal Account Allocation Committee (FAAC) last week distributed a total of N411.6 billion ($2.7 billion) from federal accounts to the three tiers of government for the month of September.The figure represented a slide by five per cent, compared with the previous month’s figure, the Accountant General of the Federation, Mr. Ibrahim Dankwambo, had disclosed at the meeting.



He added that the total revenue distributable for the month, including Value Added Tax (VAT) was N411.572 billion.Dankwambo added that the nation’s gross revenues in the month, which come largely from oil exports, fell to N472.6 billion from N501.5 billion in August, due partly to some oil infrastructure being shut down for repairs and delays to some export cargoes.


CBN’s N829bn Agric Credits



The CBN last week said it has guaranteed a total of N829.572 billion loan under the Agricultural Credit Guarantee Scheme Fund (ACGSF), in a bid to promote commercial agriculture in the country.The fund, which was disbursed between January and March this year, guarantees up to 75 per cent of credit facilities extended to farmers by banks in case of default. The Fund is managed by the CBN, which handles the day-to-day operations of the Scheme.



A report made available on the apex bank website last week showed that while N313.662 billion was allocated to livestock farming sub-sector, a total of N91.315 billion went to the Fisheries sub-sector. Mixed crops farming was also supported with a total of N16.150 billion. Food crops, which consisted of vegetables, beans, soya beans, grains, tuber and root got a total of N308.825 billion.The figure made available by the banking sector watchdog also showed that Akwa Ibom State got a total of N117.700 billion. It was closely followed by Kwara and Lagos states, which received N82.470billion and N81.942 billion respectively.


Inflation Drops


Nigeria‘s consumer inflation slumped to 13.6 per cent year-on-year in September from 13.7 per cent the previous month, the National Bureau of Statistics said last week.Growth in food prices, which form the bulk of the inflation index basket dropped to 14.6 per cent year-on-year from 15.1 per cent in August.



Inflation rate which stood at 13 per cent as at July, jumped to 13.7 per cent in August.The changes in the monetary policy direction of the Central Bank of Nigeria (CBN) from expansionary to contractionary last month, with emphasis on inflation targeting, led to the unexpected increase in its benchmark lending rate for the first time in more than a year last month to 6.25 per cent from 6.0 per cent. CBN Governor, Mallam Lamido Sanusi, had said that the desire of the apex bank is fight inflation to a single digit point.




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