PFAs withdrawal, CRR Debits Tighten Financial System Liquidity
The fixed income market traded with bias yesterday on the back of withdrawals made by Pension Fund Administrators (PFAs) and cash reserve ratio (CRR) debits by the apex bank early in the week.
These movement of funds from the PFAs and the CBN tightened liquidity in the financial system as reflected in the money market.
Chapel Hill Denham stated that financial system liquidity opened lower at N197 billion on Thursday, from N268.6 billion at market open Wednesday.
Analysts at Chapel Hill Denham said nonetheless, interbank funding rates declined for the second day.
The Open Buy Back (OBB) and Overnight (OVN) rates declined marginally by 50 basis points (bps) and 75 bps to 8.50% and 9.33%, respectively.
Thus, the fixed income market continued to trade with a bearish bias, basically due to liquidity tightening at the start of the week.
At the front end of the curve, Chapel Hill said the Nigerian Treasury Bill benchmark curve was flat at 2.04%.
Meanwhile discount rates on open market operations (OMO) bills expanded by 28 bps to 3.79%.
Analysts attributed this to upward repricing of short (+43bps to 2.66%) and long (+55bps to 4.43%) days to maturities (DTMs).
Similarly, in the bond market, the benchmark curve expanded by 62bps to 7.73%.
This was due to upward repricing of yields at the short (+84bps to 4.62%), mid (+99bps to 7.21%) and long (+32bps to 9.63%) end of the curve.
“With no major liquidity inflows expected this week, buying interests may likely remain weak.
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“Nonetheless, we expect selling pressures to ease“, Chapel Hill Denham stated.
Again, Naira continues to be facing pressure in the foreign exchange market due to low accretion into the external reserves.
This continues to limit the Central Bank of Nigeria’s intervention in the FX market and naira is losing store value feature.
Foreign exchange rate weakened by 0.06% or 25 kobo to ₦389.25 at the Investors and Exporter Window (IEW), while parallel market rate closed flat at ₦474.
The official and SMIS rates were unchanged at ₦381 and ₦380.69 respectively, based on data from the FMDQ.
Analysts said the CBN has continued to be quoting the official rate at ₦360 on its website as the external reserves stood at US$35.7 billion, having dropped 0.4% month to date.