By Ademola Alawiye

Monday, 22 Nov 2010

Financial analysts have urged the Monetary Policy Committee to maintain a base-lending rate of 6.25 per cent in order to encourage credit creation in the real sector.

Analysts at First Securities Discount House Securities said, ”The development in the money market will be influenced by the outcome of the MPC meeting scheduled for Monday, November 22, 2010.

”We expect the MPC to reduce the asymmetric corridor around the Monetary Policy Rate so that the CBN‘s effective lending rate can remain at 6.25 per cent. If this is done, bond prices will rise and cause yields to fall from the current high level and also encourage credit creation to the real sector of the economy.”

Meanwhile, inter-bank rates dropped to 8.08 per cent on the average, from 11.75 per cent recorded the previous week.

According to the FSDH weekly Nigerian Capital and Money Market Report, the inter-bank rates dipped as a result of the monthly allocation of about N223.72bn from the Federation Accounts Allocation Committee for the month of November that hit the system on Friday.

According to available data from the FSDH, the seven-day Nigeria Inter-Bank Offered Rate closed the week at 9.17 per cent, a 475 basis point decrease from the previous week‘s figure of 13.92 per cent.

The 90-day NIBOR closed the week at 12.50 per cent, a 271 basis point decrease from the previous week‘s figure of 15.21 per cent.

At the three-year Federal Government of Nigeria Bond Auction, a total of N20bn worth of securities was offered while N22.03bn was sold. The bond was 172.65 per cent subscribed as N34.53bn worth of bid was received. It was issued at a marginal rate of 11.50 per cent, higher than the October, 2010 rate.

At the open market operations segment, there was a total outflow of about N103.04bn from the market through repurchase transactions. The discount rate on the bill was 9.25 per cent across the various REPO transactions.

In all, there was a total outflow of N184.77bn from both the primary and secondary segments of the government securities market.

Cumulatively, there was a total outflow of N184.77bn from the money market through the government securities and the foreign exchange market last week.

The value of the naira appreciated in inter-bank market, and depreciated at both the official and parallel segments of the foreign exchange market during the week. At the inter-bank market, the value of the naira appreciated by 34 kobo to close at N150.40 per dollar.

At the official market, the value of the naira depreciated by 11 kobo to close at N148.81 per dollar, compared to the previous week‘s figure of N148.70 per dollar. It lost 10 kobo to close at N152.50 per dollar at the parallel market, compared to the previous week‘s figure of N152.40 per dollar.

 

Source: Punch