CBN Avoids OMO Sale, as System Liquidity Dips to Negative


February 18, 2019/Zedcrest Capital 

***Pension fund equals 7.4% of GDP at N8.63trn*** – PENCOM


Indicator Value Commentary
Inflation 11.37% As at February 15, 2019. A c.7bps decline from 11.44% recorded in December 2018
MPR 14.00% Left Unchanged for the 15th Consecutive Time at the Jan. 22, 2019 MPC Meeting
External Reserves $42.84bn As at February 15, 2019. A c.0.02% decrease from $42.86bn on February 14, 2019
Brent Crude $66.30pb As at February 18, 2019. A c.3.48% increase from $65.58pb on February 15, 2019


The Bond Market opened the week on a relatively quiet note, as market players digested news of the postponed Nigerian Elections. Yields rose marginally higher by c.6bps following slight sell on the 2028s, in anticipation of renewed supply of the bond at the FGN auction scheduled for Wednesday. Market players however remained well bid on the longer end of the curve, especially the 37s which compressed by c.9bps on the day.

We expect the market to remain relatively stable as investors have maintained a relatively bullish posture despite the impending risks of the elections.

Benchmark FGN Bonds
Description Bid (%) Offer (%) Day Change (%)
14.50 15-Jul-21 15.12 14.56 0.03
16.39 27-Jan-22 14.65 14.23 0.31
14.20 14-Mar-24 14.59 14.48 (0.01)
12.50 22-Jan-26 14.82 14.55 0.14
16.29 17-Mar-27 14.80 14.61 0.13
13.98 23-Feb-28 14.87 14.77 0.09
12.15 18-Jul-34 14.60 14.33 (0.02)
12.40 18-Mar-36 14.60 14.26 (0.01)
16.2499 18-Apr-37 14.40 14.10 (0.09)

Source: Zedcrest Dealing Desk 

Treasury Bills

The T-bills market turned slightly bearish in today’s, with yields higher by c.7bps in response to the liquidity squeeze from the wholesale FX sale by the CBN. The CBN floated a N30bn OMO auction, but issued a no sale result despite the significant subscription of c.N128bn. This was in a bid to avoid heightening the liquidity pressures in the system.

We expect yields to remain slightly elevated in view of the estimated negative system liquidity levels.

Treasury Bills
Description Bid (%) Offer (%) Day Change (%)
14-Mar-19 12.00 11.50 0.00
4-Apr-19 13.50 12.90 0.40
2-May-19 12.00 11.00 0.00
13-Jun-19 13.00 11.00 0.00
18-Jul-19 13.50 12.50 0.00
1-Aug-19 13.00 12.80 0.05
12-Sep-19 14.65 14.40 0.05
3-Oct-19 15.00 14.85 0.10
14-Nov-19 14.95 14.75 0.05
5-Dec-19 14.95 14.80 0.05
2-Jan-20 15.05 14.90 0.05

Source: Zedcrest Dealing Desk 

Money Market

Rates in the money market spiked by c.7pct with system liquidity estimated to have dipped to a negative level of c.N45bn on the back of the wholesale FX auction by the CBN. The OBB and OVN rates consequently ended the session at 23.33% and 26.08%.

We expect rates to remain elevated, as there are no significant inflows expected tomorrow.

Money Market Rates
  Current (%) Previous (%)
Open Buy Back (OBB) 23.33 15.83
Overnight (O/N) 26.08 17.50

Source: FMDQ, Zedcrest Research 

FX Market

At the Interbank, the Naira/USD rate depreciated by 0.02% to N306.80/$ at the spot market, while the SMIS rate remained unchanged at N357.10/$. The NAFEX rate in the I&E window depreciated by c.0.12% to N362.07/$. At the parallel market, the cash rate depreciated by 0.14% to N358.20/$, while the transfer rate remained unchanged at N365.00/$.

FX Market
  Current (N/$) Previous ( N/$)
CBN Spot 306.80 306.75
CBN SMIS 357.10 357.10
I&E FX Window 362.07 361.65
Cash Market 358.20 357.70
Transfer Market 365.00 365.00



The NGERIA Sovereigns opened the week on a relatively calm note, with bids slightly weaker at the open due to slight risk off stance in view of the postponed Nigerian elections and slower demand in absence of US flows.

The NGERIA Corps were relatively quiet, with slight interests on the SEPLLN 23s following sustained gains in Oil prices. We however witnessed slight selloff on the ACCESS 21s Snr.

Proshare Nigeria Pvt. Ltd.

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