Money Market Rate Decreased As Overnight Rate Fell To 17.50%

Culled—Proshare

February 18, 2019/Anchoria AM Research

Money Market

The money market rate decreased last week as the Overnight rate (OVN) and Open Buy Back (OBB) fell to 17.50% and 15.83% respectively. Consequently, the average money market rate fell by 2.38% to settle at 16.67% due to the increase in the System liquidity to cN330bn from a negative figure of cN128bn in the previous week. Major inflow for the week included: OMO repayment of cN800bn and Coupon Payment of cN47bn while Outflow for the week included: OMO sales of cN545bn; Weekly Wholesale, Invisible and SME FX auction of $210mn and Bi-weekly retail auction. 

It must be asserted that the lending rate rose to as high as 43% on Monday due to the inability of banks to access CBN Standing Lending Facility (SLF) to fund their deficit.

Instrument 08/02/2019 15/02/2019 Change
OBB 18.67% 15.83% -2.84%
OVN 19.42% 17.50% -1.92%

Source: Anchoria AM Research, FMDQ OTC 

Forex: USD/NGN

The CBN Official rate reversed its downward trend to close at N306.75/$, an 0.02% increase while the rate in the Investors and Exporters’ FX Window fell by 0.02% to close at N361.65/$. We observed an increase in the market turnover in the I&E Window to $1.67 billion during the week from $0.81 billion in the previous week. However, Naira at the parallel market depreciated marginally by 0.28% to close at N361.00/$ (using the Everdon BDC Rate). 

We expect rates in the parallel market to remain constant as the apex bank continues to supply FX into the market, coupled with its frequent Wholesale and Retail SMIS programme.

08/02/2019 15/02/2019 Change
CBN Official Rate 306.70 306.75 +0.02%
I&E FX Window 361.73 361.65 -0.02%
Everdon BDC Rate 361.00 362.00 +0.28%

Source: Anchoria AM Research, FMDQ OTC 

Commodities

The Brent Crude Oil and WTI Crude Oil rose by 6.68% and 5.44% to close at $66.25 and $55.59 per barrel respectively due to OPEC Output Cut and Saudi Arabia Shutdown. 

Fixed Income

Bond: FGN

Ahead of the election date previously scheduled for Saturday, 16 February 2019, the Bond Market remained bullish as sustained demand were seen on most maturities during the week. Notable amongst them include 2022s (49bps) and 2036s (34bps).  Average yields fell by 3bp to close the week at 14.65%. Other factors that shaped the market include: improved results of Q4 GDP Growth Rate which came in at 2.38%; Moderation of the headline inflation rate in January to 11.37% (11.44% previously) 

With the postponement of the General Elections on the election day, we expect the market to open on a quieter note this week, although we do not expect a drastic change in market trend during the week.

Secondary Market

Proshare Nigeria Pvt. Ltd.

Source: Anchoria AM Research, FMDQ OTC 

Treasury Bills

Despite an increase in system liquidity during the week, the treasury bills market traded on a bearish note. Consequently, the average yield rose by 14bps to close the week at 14.75%.

The T-bill auction conducted during the week witnessed an oversubscription with spot rate trending lower than the previous stop rate

Secondary Market

Proshare Nigeria Pvt. Ltd.

Anchoria Research: +234 908 720 6076;  research@anchoriaam.com

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