The total amount of outflow in the Nigerian Interbank market in the month of November was N1.28 trillion, a report by the Financial Market Dealers Association (FMDA) has said.

A breakdown of the FMDA Monthly Financial and Economic Report for November, posted on its website, showed that whereas a total of N550 billion was expended on forex, autonomous sources, which included bond auction gulped N65 billion and N666.73 billion was spent on treasury bills auction.

On the other hand, a total inflow of N870.91 billion came into the system in the month under review, through allocation from the federation account to the three tiers of government, matured bills, Excess Crude Account funds and Repo.

It said that though monetary policy indices remained unchanged during the month, the outcome of the October monetary policy committee (MPC) extraordinary meeting kept reverberating in the market.

At the extraordinary MPC meeting in October, the committee had raised the monetary policy rate (MPR) to 12 percent, had increased cash reserve ratio (CRR) from 4 per cent to 8 percent, and had reduced the Net Open Position Limit from 5.0 percent to 1.0 percent of shareholders funds.

“The immediate effect was market illiquidity occasioned by the aggressive mop up through Nigerian Treasury Bills sale at the Open Market Operations and the Primary Market Auctions. The market reacted proportionately as rates went up gradually to signal increase in assets prices and cost of funds in the market.

“Unexpectedly, the injection from the Federation Account Allocation Committee (FAAC) in October that should create liquidity and impacted the month of November was delayed as rates soared in the first few days of the month,” it explained.

The report also stated that the measures that were adopted at the November MPC meeting in ensuring price and exchange rate stability – especially the adjustment in the midpoint of the official exchange rate from +/ – 3 per cent of N150/$1 to +/- 3 per cent of N155/$1, helped to calm the naira, adding that the local currency firmed up considerably against the dollar at the Wholesale Dutch Auction System (WDAS) during the month.

“The naira/dollar relationship at the Bureaux de change (BDC) /parallel market opened at $1/ N161. At the BDC/Parallel market, it traded mid-month at $1/ N160-162 and closed the month at $1/ N162. The premium between CBN and Parallel market as at month-end November was N5.69 representing 3.64 per cent. The month-end figure is less than the International Monetary Fund (IMF) benchmark of 5 per cent, but poor information management could still give room for speculation and panic buying in the market.

“With 37.75 percent reduction in volume, the CBN offered $1.680 billion and sold $1.763 billion against the $3. 054 billon demanded by the market in the month of November,” it added.

Source: ThisDay/Obinna Chima