System liquidity remained robust last week as OMO maturity worth N123.00 billion flowed into the system. Consequently, the Open Buy Back (OBB) closed at 1.25% from 3.33% the previous week while Overnight rate (OVN) closed at 1.50% from 4.33% the previous week.
Following the last Monetary Policy Committee (MPC) meeting for the year, CBN kept its Monetary Policy Rate (MPR) at 11.50%, Cash Reserve Ratio (CRR) at 27.50%, Liquidity ratio at 30% as well as the asymmetric corridor around the MPR at +100/-700 basis points
We expect continued buoyancy in system liquidity during the week barring any liquidity mop-up by the Central Bank.
Last week, Naira depreciated by 2.08% against the dollar, closing at N490/$1 compared to N480/$1 in the parallel market in the previous week while the rate at the I& E window appreciated. This decline in the parallel market is in spite of over $1 billion sold by the Central Bank of Nigeria (CBN) since September 7, 2020 when it resumed dollar sales to the BDC operators in the Country. The sale of $10,000 twice weekly to the BDCs around the Country has failed to shore up the value of Naira, which has continued to weaken due to speculative activities.
In a circular released by the CBN, the weekly exchange rate for disbursement of proceeds of International Money Transfer Service Operators (IMTOs) pegged IMTOs sale of dollar to banks at N388/$; banks sale of dollar to BDCs at N390/$ and CBN sale of dollar to BDCs at N390/$. The BDCs are now expected to sell to end-users at not more than N392/$ and each BDC is entitled to buy $10,000 weekly.
Expectations remain positive for the naira as the Central Bank continues to carry out measures aimed to stabilize and unify the exchange rate.
The secondary sovereign Bond market closed bullish last week as the average yield fell by 12bps to close at 3.88% compared to 4.01% in the previous week. The highest yield decline was seen in the JAN-2022 which contracted by 83bps to close at 0.70% while the highest yield increase was witnessed in the JAN-2026 bond which rose by 44bps to close at 3.81% compared to 3.37% the previous week.
The sovereign Eurobond market closed bullish as the yields fell by 27bps to close at 5.80% compared to 6.08% the previous week. In the same vein, the corporate Eurobond market closed bullish as the yields fell by 25bps to close at 6.24% compared to 6.48% the previous week. The bullish activities in the Eurobond market dwells on the news of the improvement in the development of the COVID-19 vaccine and the relative stability in the oil market
We expect to see sustained demand in the Bond market as investors continue to re-invest their maturities while retaining a cautionary approach in the market.
The Treasury bills market closed bearish last week as the average yield fell by 1bps to close at 0.10% compared to 0.11% the previous week. Similarly, average yield on OMO bills fell by 0.03% to close at 0.10% compared to 0.13% the previous week.
We expect decreased demand for T-bills considering the rock bottom yields.
Brent oil closed at $48.27 per barrel compared to $45.24 per barrel the previous week. Similarly, WTI rose by 8.02% to close at $45.53/barrel.
The increase in price of crude may be attributed to the news of the positive vaccine development.
In the coming week, oil prices are expected to remain positive though rising Libya output will most likely contribute to the oil glut.