CBN to sustain liquidity mop up as interbank inflow hits N172bn

THE Central Bank of Nigeria, CBN, is expected to sustain its liquidity mop up activities this week in response to inflow of N172 billion into the interbank money market.

Last week, the apex bank mopped up N166 billion by issuing secondary market (Open Market Operations, OMO) treasury bills (TBs). The resulting outflow, which offset inflow of N46.25 billion from matured TBs occasioned 660 basis points (bpts) increase in average short term cost of funds in the interbank money market last week. Data from FMDQ showed that interest rate on Collateralised (Open Buy Back, OBB) lending rose by 643 bpts to 16.29 percent last week from 9.86 percent the previous week.

Similarly, interest rate on Overnight lending rose by 672 bpts to 17.29 percent last week from 10.57 percent the previous week. Analysts at Lagos based investment firm, Afrinvest projected that this trend might persist this week due to expectation that the apex bank will conduct OMO auction to mop up N172 billion inflow from maturing TBs. CBN The Central Bank of Nigeria head office in Abuja.

They said: “In the coming week, we expect instruments worth a combined N172.5 billion to mature on the 1st (N109.7 billion) and 2nd (N62.8 billion) of May, which should enhance system liquidity in the shortened week. Hence, we anticipate an OMO auction from the CBN at the start of the week, given the long position of the system, as well as another auction when the financial market re-opens on the 2nd of May to manage system liquidity.”

… to launch clean note policy tomorrow Meanwhile the CBN will tomorrow launch the Clean Note policy and the Bank Fitness guidelines. In a statement announcing the launch, the CBN said: “The Clean Note Policy provides a uniform standard for circulation of only clean and fit notes; while the Banknote Fitness Guidelines provide the industry with clear and acceptable criteria for determining the quality of bank notes in circulation.”

The CBN also said that it has developed a mechanism to ensure full compliance with the documents by stakeholders adding that complaint channels such as phone and emails would be provided to enable the general public provide information on infractions of the two documents. Naira in mixed performance as I&E turnover fall by 63% The naira last week recorded mixed performance in the foreign exchange market even as the volume of dollars traded in the Investors and Exporters (I&E) window fell by 63 percent.

Though the naira appreciated 30 kobo in the parallel market, it however depreciated by 35 kobo in the I&E window. According to the, the exchange rate platform of the Association of Bureaux De Change Operators of Nigeria (ABCON), the parallel market exchange rate dropped to N359 per dollar last week from N359.3 per dollar the previous week, indicating 30 kobo appreciation for the naira.

Data from FMDQ, however, showed that the indicative exchange rate of the I&E window rose to N360.64 per dollar last week from N360.29 per dollar the previous week, indicating 35 kobo depreciation for the naira.

The depreciation might not be unconnected with the sharp decline in the volume of dollars traded in the window last week, which fell by 63 percent to $700 million from $1.9 billion the previous week. The sharp drop in level of activities might be due to the Easter holidays which reduced the number of days available for trading.

Meanwhile, the CBN sustained its weekly dollars sales of $210 million in the interbank foreign exchange market. The apex bank allocated $100 million to the wholesale segment of the market while the Small and Medium Enterprises (SMEs) segment received $55 million.

Similarly, customers requiring foreign exchange for invisibles such as tuition fees, medical payments and Basic Travel Allowance (BTA), among others, were also allocated $55 million. Expansion in economic activities persist in April–PMI report In another development, the CBN on Friday released its Purchasing Managers Index (PMI) report for April which indicated that expansion in economic activities persisted during the month.

The report showed that 31 subsectors recorded growth while two subsectors contracted in April. The report also showed that the Manufacturing sector PMI rose higher to 57.7 index points in April from 57.4 index points in March.

The Non-Manufacturing PMI also rose higher to 58.7 index points in April from 58.5 index points in March. The report stated: “The Manufacturing PMI in the month of April stood at 57.7 index points, indicating expansion in the manufacturing sector for the twenty-fifth consecutive month. The index grew at a faster rate when compared to the index in the previous month.

“Twelve of the 14 subsectors surveyed reported growth in the review month in the following order: electrical equipment; plastics & rubber products; cement; petroleum & coal products; transportation equipment; food, beverage & tobacco products; nonmetallic mineral products; chemical & pharmaceutical products; furniture & related products; textile, apparel, leather & footwear; printing & related support activities and fabricated metal products.

The paper products and primary metal subsectors recorded decline in the review period. “The composite PMI for the nonmanufacturing sector stood at 58.7 points in April 2019, indicating expansion in the Non-manufacturing PMI for the twenty-fourth consecutive month. The index grew at a faster rate when compared to its level in March 2019.

“All the 17 subsectors surveyed recorded growth in the following order: management of companies; real estate rental & leasing; construction; wholesale/retail trade; agriculture; health care & social assistance; finance & insurance; professional, scientific, & technical services; educational services; water supply, sewage & waste management; information & communication; accommodation & food services; repair, maintenance/washing of motor vehicles; arts, entertainment & recreation; electricity, gas, steam & air conditioning supply; transportation & warehousing and utilities.”

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