Interest Rates to Ease on Occasion of “Christmas Bumper” N1.61trn Maturities

The expectation that N1.61 trillion maturities will be re-paid to investors this Yuletide month is the saving grace that interest rates will be more benevolent, compared to the month of November when liquidity squeeze ensured rates where slightly up.
“We expect maturities of about N1.023 trillion (91-day Treasury Bills (TB): N22.97 billion, 182-day: N30 billion, 364-day: N71.36 billion, Open Market Operation (OMO): N458.75 billion and Special OMO: N440 billion) to be repaid in December”, said FSDH Research.
Although the central bank of Nigeria (CBN) is expected to continue with its OMO activities to moderate liquidity condition in the market, the level of maturities to be paid will help ensure that rates to face downward pressure in the month of December.
It is also expected that the CBN would be able to defend the value of the Naira in the short-to-medium term, without resort to the devaluation of the Naira, due to the robust external reserves position.
But the money market rate was marginally higher in November, compared with October. The relative tightness in the market was brought about by the continued use of the Open Market Operation (OMO) by the Central Bank of Nigeria (CBN) to moderate the liquidity level in the system, due to huge maturities repayment of government securities. Also, the sale of foreign exchange by the CBN contributed to the tightness in November. Consequently, the average money market rates were marginally higher in November, compared to October.
The 7-Day NIBOR opened the month of November at 11.13 percent, compared with 10.92 percent in October. The 7-day rate hit a high of 14.46 percent on November 15, 2013 compared to a high of 14.83 percent on October 09, 2013 and trended downwards to end the month at 10.96 percent, a 17 basis points decrease from 11.13 percent as at end-October. Similarly, the 90-Day NIBOR opened the month of November at 12.58 percent, compared to 11.75 percent in October, and increased by 288 basis points to a month high of 15.46 percent on November 15, 2013. The 90-Day NIBOR trended downwards to settle at 12 percent as at end-November, a 58 basis points decrease from end-October figure. The mop-up activities of the CBN continue to influence NIBOR direction in the review period.
At the 91-Day Treasury Bill (TB) auction, a total of N42.71bn worth of securities was offered and sold to competitive bidders in November. The bill was 169.66 percent subscribed as N72.46 billion worth of bid was received from competitive bidders. A total of N42.71 billion worth of matured bills was repaid into the system leading to a net nil flow from this segment of the market.
At the 182-Day TB auction, a total of N55 billion worth of securities was offered and sold to competitive bidders in November. The bill was 248.67 percent subscribed as N136.77 billion worth of bid was received from competitive bidders. A total of N55 billion worth of matured bills was repaid into the system, leading to a net nil flow from this segment of the market.
At the 364-Day TB auction, a total of N102.08 billion worth of securities was offered and sold to competitive bidders in November. The bill was 224.41 percent subscribed as N229.08 billion worth of bid was received from competitive bidders. A total of N102.08 billion worth of matured bills was repaid into the system, leading to a net nil flow from this segment of the market.
At the Open Market Operation (OMO) transactions held in November, there was a total outflow of about N367.12 billion from the system, while there was a total inflow of N130.46 billion, leading to a net outflow of N236.66 billion from this segment of the market. The transactions were traded at a discount rate range of 12 percent – 12.20 percent.
At the auctions held in the month of November at the Retail Dutch Auction System (RDAS), the CBN offered a total of $2.45 billion, down 6.12 percent from $2.60 billion offered in October. Of the amount offered in November, the total sale was $2.40 billion, down marginally by 0.42 percent from $2.39 billion sold in October.
Cumulatively, there was a net outflow of N610.37 billion from the government securities market and the foreign exchange market in the month of November.
In November, the value of the Naira against the U.S. Dollar appreciated at the inter-bank and official market segments of the foreign exchange market, while it depreciated at the parallel market, compared to October. At the inter-bank market, the value of the Naira appreciated by 45 kobo to close the month at N158.45/$ from N158.90/$ recorded in October. At the official market segment, the value of the Naira also gained 8kobo to close at N155.72/$ from N155.80/$ recorded in the preceding month, while at the parallel market, the value of the Naira depreciated by 250 kobo to close at N168.50/$ from N166/$ recorded in October.

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