How CBN mopped-up N808.96bn, injected $269.92m, CNY31.34m into FX market

…Investors’ profit-taking down equities market by N41bn in five days
As part of efforts to mop up excess liquidity in the system, the Central Bank of Nigeria (CBN) last week increased the spate of its Open Market Operation (OMO), selling a total of N808.96 billion over four auctions.

Also, in its periodic intervention in the inter-bank segment of the foreign exchange markets, on Friday, March 8, 2019, the apex bank injected the sums of $269.92 million and CNY 31.34 million in the Retail Secondary Market Intervention Sales (SMIS) of the Foreign Exchange market.

It is worthy of note that the overnight lending rate moderated by 733 basis w/w to close at 10.08per cent, amidst inflows from matured OMO bills (N228.95 billion); FAAC disbursements to state and local governments (c. NGN340 billion); Paris Club refunds (undisclosed), and Investors &Exporters window foreign exchange purchases by the CBN, all of which supported system liquidity during the week.

Commenting on this development, analysts at Cordros Capital said inflows from matured OMO bills this week (N212.73 billion) and bond coupon (N51.20 billion) will bolster system liquidity.

However, liquidity mop-up and foreign exchange intervention by the CBN are likely to exert upward pressure on the overnight lending rate.

On the bond market, proceedings were similarly bearish, following a slowdown in demand from foreign investors and profit taking by local players.

As a result, average yield widened by 30 basis points w/w to close at 14.24per cent. Sell pressure was spread across the short (+43 basis points), mid (+20 basis points), and long (+27 basis points) segments, with the respective yield on the JUN-2019 (+134 basis points), FEB-2028 (+45 basis points), and APR-2037 (+41 basis points) bonds, respectively.

The DMO issued a revised issuance calendar for Q1-19, indicating, a reduction in the offering of the FEB-2028 (10-year) bond, from a range of N45-N50 billion to NGN15-N25 billion, as the bond, which has an outstanding value of N693.69 billion, is likely to be phased out this month. The MAR-2025 (7-year) which was previously excluded from the upcoming March auction will now be on offer (N35-N45 billion).

Meanwhile, the dollar interventions were for customers in the agricultural, airlines, petroleum products and raw materials and machinery sectors, while the CNY 31.34 million components was for payment of Renminbi-denominated Letters of Credit for agriculture as well as raw materials.

Confirming the figures, the Bank’s Director, Corporate Communications Department, Mr. Isaac Okorafor, said the level of stability in the market was commendable and would be sustained by the Bank.

Friday’s transaction was in addition to the $210 million injected into the Wholesale, Small and Medium Enterprises, and Invisibles segments of the market on Tuesday, March 5, 2019.

The exchange rates closed at the rate of N357/$1 on Friday, March 8, 2019, in the Bureau De Change segment of the market, while the Chinese Yuan, closed at N47/CNY1.

Consequently, investors in the equities market of the Nigerian Stock Exchange (NSE) recorded a negative outing losing N41 billion, driven by profit-taking on major bellwether across the five sectors.

In summary, the NSE All-Share Index (ASI) was down by 97.27 basis points, representing a decrease of 0.31 per cent to close at 31,924.51 basis points from 31,827.24 basis points the market opened for trading in the prior week.

As a result, the market capitalisation decreased by N41 billion, closing at N11.91 trillion from N11.869 trillion it opened for trading last week.

Just like the prior week, the NSE also closed three of the five trading sessions this week negative.

On a week-on-week basis, four sectors closed negative as NSEOILGAS led the losers chart with 2.56 per cent, trailed by NSE Industrial Index with 1.72 per cent, NSEINS with 1.30 per cent, and Consumer goods with 1.02 per cent, save for banking sector which gained 3.37 per cent.

Overall, the total turnover of 1.29 billion shares worth N13.89 billion in 17,259 deals was traded this week by investors on the floor of the Nigerian exchange in contrast to a total of 1.75 billion shares valued at N19.68 billion that exchanged hands last week in 22,314 deals.

Data gathered on the NSE showed that 23 equities appreciated in price last week, lower than 29 equities in the preceding week. 34 equities depreciated in price last week, higher than 31 equities in the preceding week, while 113 equities remained unchanged, higher than 110 equities recorded in the preceding week.

An analyst at GTI Securities Limited stated that “Amidst depressed sentiment, partly attributable to the uncertainty of government policy direction and concern about the extension (or otherwise) of the apex bank governor’s tenor, we anticipate a sub-par performance in the coming week.

“Hence, we guide investors to take the position only on fundamentally sound stocks.”

Similarly, Analyst at APT Securities and Fund Limited said that “investors took advantage of stocks that have shed weight due to negative sentiments.

“We expect more up days in the next trading week following the outcome of the gubernatorial election,” he stated.