2017: Money market dealers anticipate stable interbank lending rate this week

Following the official closure of the money and foreign exchange markets for the celebration of the New Year, dealers say they anticipate interbank lending rates to remain stable when the markets open for the first week in 2017.

In the just concluded week, 206-day treasury bills worth N93.18 billion matured in the secondary market. In line with dealers’ expectations, interbank rates decreased across all tenor buckets amid liquidity ease –Nigeria Interbank Offered Rate (NIBOR) for overnight funds, 1month, 3months and 6 months funds decreased week on week (w-o-w) to 10.04 percent (from 23.23%), 17.72 percent (from 18.74%), 18.56 percent (from 19.95%) and 22.21percent (from 23.37%) respectively.

Meanwhile, Nigerian Interbank Treasury Bills True Yields (NITTY) moved in mixed directions – yields on1month and 12months maturities rose to 15.64 percent (from15.45%) and 22.67 percent (from21.79%) respectively.

However, the yields on 3 months and 6 months maturities fell to16.64% (from18.75%) and 19.65 percent (from19.75%) respectively. “This week, treasury bills worth N125.845 billion will mature via the primary market. They include 91-day bills worth N28 billion, 182-day bills worth N42 billion and 364-day bills worth N55.845 billion, making dealers at Cowry Assets Management to anticipate stable interbank lending rates.

The foreign exchange market in the just concluded week had the Naira depreciating against the dollar at the interbank foreign exchange market by 0.12 percent to N315.00/USD. Elsewhere, the Naira appreciated at both the Bureau De Change and parallel market segments by 1.23 percent and 1.01percent to N482/USD and N490/USD respectively amid the persistent scarcity of the greenback.

According to foreign exchange traders, the Central Bank of Nigeria (CBN) sold USD1billion to clear a backlog of USD obligations in some specific sectors amongst which include airlines, fuel importers, and manufacturing firms.

Dealers from Cowry Assets Management said the sales may have had an impact that led to the further appreciation of the Naira against the USD.

Meanwhile, the weekly movements in most dated forward contracts at the interbank over-the-counter (OTC) segment implied marginal stability of the Naira relative to the US dollar amid an increase in the foreign exchange reserves – external reserves increased week-on-week by 1.86% to USD25.72 billion as at Wednesday, 28 December 2016.

The spot rate, 1month, 3months, 6months and 12 months forward contracts were stable at N305.25, N320.18/USD, N330.537/USD, N346.07/USD and N378/USD respectively. There was a USD7.5million intervention sales by CBN to banks during the week.

In the current week, dealers expect stability of the Naira/USD exchange rate following the intervention by the Central Bank of Nigeria (CBN).