Will Money Market Remain Liquid As 2012 Ends?

The year 2012 was one of ups and downs for the money market.  During the period, the times of liquidity surfeit and illiquidity were almost shared equally. It was like a pregnant woman about to deliver – usually between contraction and period of relief. After some brief relapse into illiquidity, the market bounced back last week with the inflow of N255 billion Federation Account Allocation Committee (FAAC) funds, making the inter-bank rates to end lower.
As if the odds were benign on the market, another N217.74 billion maturity is set to hit the system this week, barely another one week to close the year. Analysts express optimism that the New Year will dawn with reasonable liquidity.
According to David Okun, a market analyst in Lagos, reasonable liquidity in the system at the beginning of the year means good tidings for that year.
The FSDH Securities said it expects government securities maturity of about N217.74 billion (91 days – N21.84 billion; 182 days- N52.73 billion and Open Market Operations (OMO) Bills Maturing – N143.17bn) to hit the system this week, which would further improve the liquidity in the market.
It however expressed some scepticism that the Central Bank of Nigeria (CBN) may continue with its OMO activities to moderate liquidity condition in the market.
“We expect rates to remain relatively stable”, it said.
There was liquidity in the market last week due to the injection of funds by the Federation Account Allocation Committee (FAAC) to the tune of N255 billion into the system. Consequently, inter-bank rates dropped to end the week.
At the inter-bank market, the 7-day Nigerian Inter-Bank Offer Rate (NIBOR) closed the week lower at 11 per cent, 383 basis points decrease from the previous week’s figure of 14.83 per cent, while 90-day NIBOR also closed lower at 12.92 per cent, 262 basis points decrease from the previous week’s figure of 15.54 per cent.
At the 91-day Treasury Bill (TB) auction, a total of N33.27 billion worth of securities was offered and sold to competitive bidders. A total of N26.66 billion was sold to non-competitive bidders, bringing total offer and sale to N59.93 billion. The bill was 120.30 per cent subscribed as N40.02 billion worth of bid was received from competitive bidders. The bill was issued at a discount rate of 11.67 per cent. A total of N37.49 billion worth of matured bills was repaid into the system, leading to a net outflow of N22.44 billion from this segment of the market.
At the 182-day TB auction, a total of N35.03 billion worth of securities was offered and sold to competitive bidders. A total of N25.11 billion was sold to non-competitive bidders, bringing total offer and sale to N60.14 billion. The bill was 123.35 per cent subscribed as N78.24 billion worth of bid was received from competitive bidders. The bill was issued at a discount rate of 11.70 per cent.
A total of N63.14 billion worth of matured bills was repaid into the system, leading to a net inflow of N3 billion into this segment of the market.
At the 364-day TB auction, a total of N69.36 billion worth of securities was offered and sold to competitive bidders. A total of N45 million was sold to non-competitive bidders, bringing total offer and sale to N69.41 billion. The bill was 260.12 per cent subscribed as N180.42 billion worth of bid was received from competitive bidders. The bill was issued at a discount rate of 11.799 per cent. A total of N47.03 billion worth of matured bills was repaid into the system, leading to a net outflow of N22.38 billion from this segment of the market.
At the re-opening of the 5-year FGN Bond auction with a maturity date of April 27, 2017, the CBN offered and sold N16.49 billion, while it was 267.92 per cent subscribed at N44.18 billion. The bond was issued at a marginal rate of 11.80 per cent.
At the re-opening of the 7-year FGN Bond auction with a maturity date of June 29, 2019, the CBN offered and sold N30 billion, while it was 140.50 per cent subscribed at N42.15 billion. The bond was issued at a marginal rate of 12.10 per cent.
At the OMOs and Repurchase (REPOs) transactions held during the week, there was a total inflow of about N257.78 billion into the system, while there was a withdrawal of about N413.56 billion from the system. This brought about a net outflow of N155.78 billion from this segment of the market. The transactions were traded at a discount rate of 14.01 per cent.
At the foreign exchange auction held on Monday, December 17, 2012, the CBN offered and sold a total of $200 million. On Wednesday, December 19, 2012 the CBN offered and sold a total of $300 million. In all, the CBN offered and sold a total of $500 million.
Cumulatively, a total net outflow of N233.66 billion was withdrawn from the market via the government securities and foreign exchange market during the week.
The value of naira remained unchanged at the official and the parallel market segment of the foreign exchange market during the week, while it depreciated in the inter-bank market. At the official market, the value of the Naira closed unchanged, at N155.77/$, same as in the previous week. Also, the value of the naira at the parallel market closed unchanged, at N159.20/$. At the inter-bank market, the value of the naira dropped 35kobo to close at N157.30/$ from N157.65/$ in the previous week.