BY BAMIDELE FAMOOFO
Banks’ opening position averaged N255.95 billion within the review period in December (1st -28th). This is an increase of 32.77 percent from the average opening position of N192.77 billion in the same period in November (1st-28th).
The increase in liquidity can be partly linked to the payment of FAAC which increased by 22.84 percent to N902.05 billion in November from N736.78 billion in December.
Banks’ position opened with no negative balance within the review period compared to five periods of opening negative balance in November. During the review period, OMO repayment was N5billion with no OMO bill sold.
Short-term interbank rates averaged 11.65 percent p.a, an increase of 18bps from the average of 11.47 percent p.a in the same period in November.
During the review period, there were two primary market auctions for treasury bills. A total sum of N382.46 billion was sold, while N33.97 billion was repaid, leading to a net outflow N348.49 billion. Total sales in December was 26.94 percent lower than N523.55 billion sold in November. Despite the hike in MPR by the central bank of Nigeria in November, the Treasury bill rates moved further away from the MPR. Yields fell by an average of 367bps across the three maturities at the primary market. On the other hand, rates at the secondary market were flat.
The Nigerian forex market is segmented with multiple exchange rates. The official market is the Investors and Exporters window (IEFX). The exporters and investors use this window, while the CBN intervenes to stabilize the currency. It serves as a barometer for measuring potential and actual CBN intervention in the market. Some of the exchange rate determinants are balance of payments, capital inflows and trade balance. Due to the wide disparity between the IEFX rate and the parallel rate (N413) and low forex supply from CBN, the parallel market has become more efficient for carrying out most foreign transactions.
The naira traded within the band of N445.33/$ – N461.3/$ in December (1st-28th) at the I&E window. It averaged N450.06/$, 0.96 percent depreciation from the average of N445.80/$ in the same period in November. On the other hand, the naira at the parallel market touched a low of N752/$ in the month of December compared to the low of N875/$ in November. On the average, naira appreciated by 6.90 percent to N743.89/$ in December (1st – 28th) from the average of N799.05/$ in the same period in November. The appreciation of the naira at the parallel market is partly due to naira tightness and improved forex supply.
The foreign exchange reserves fell by 0.40 percent ($150mn) to close December 23rd at $36.97 billion from $37.12 billion in November 28th. The decline was due to lower oil prices, sub-optimal oil production and the CBN’s effort to support the currency.
