CBN Looks to Improve Retail FX Liquidity in The Parallel Market Through a Series of Directives

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Tuesday, December 1, 2020 / 9:03 AM / By Zedcrest Capital / Header Image Credit: The Guardian Nigeria


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FGN Bonds

The FGN Bonds market opened trading right where it left off last week, as yields continued to rise amidst sustained apathy for bonds by local investors at these levels. Yields expanded by another c.24bps on the average across the benchmark bond curve, as offers improved across the curve with the most actively traded security on the day being the 2026s paper.

 

The market is expected to remain testy as the direction of yields remains unclear in the interim, and the PFAs continue to remain on the side-lines at these levels.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

 

16.39 27-Jan-22

0.91

0.03

(0.29)

 

12.75 27-Apr-23

2.50

1.26

0.64

 

14.20 14-Mar-24

3.00

1.00

0.98

 

13.53 23-Mar-25

3.00

1.10

0.50

 

12.50 22-Jan-26

4.10

3.60

0.30

 

16.29 17-Mar-27

4.60

3.50

0.21

 

13.98 23-Feb-28

4.60

3.50

0.20

 

14.55 26-Apr-29

4.60

3.50

0.20

 

12.15 18-Jul-34

5.35

4.85

0.15

 

12.50 27-Mar-35

5.35

4.85

0.15

 

12.40 18-Mar-36

5.35

4.85

0.25

 

16.2499 18-Apr-37

5.35

4.85

0.15

 

9.80 24-Jul-45

6.20

5.00

0.05

 

14.80 26-Apr-49

7.05

6.60

0.05

 

12.98 27-Mar-50

7.05

6.65

0.05

 

 

Treasury Bills

And in a similar fashion, OMO rates ticked up across the board as supply continued to outweigh demand for a second consecutive trading session. The long-dated maturities remained the most pressured with offers as high as 0.30% (15bps uptick D/D), as offshore investors continue to gradually exit holdings in local OMOs as the CBN improves FX supply at the I&E FX window. Consequently, rates across the benchmark OMO curve weakened by 3bps on the average.

We expect rates to continue to falter in the market as local banks look away from improved rates in order to prioritise proving liquidity for FX-related system outflows.

 

Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOM 01/05/21

0.10

0.05

0.00

NGOM 02/02/21

0.10

0.10

0.00

NGOM 03/02/21

0.30

0.10

0.00

NGOM 05/11/21

0.30

0.15

0.00

NGOM 06/08/21

0.30

0.15

0.00

NGOM 08/10/21

0.30

0.20

0.00

NGOM 09/07/21

0.40

0.20

0.10

NGOM 10/19/21

0.40

0.25

0.10

 

 

Benchmark NTBills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 12/31/20

0.10

0.05

0.00

NIGTB 01/14/21

0.10

0.05

0.00

NIGTB 02/11/21

0.10

0.10

0.00

NIGTB 03/11/21

0.30

0.15

0.00

NIGTB 04/29/21

0.30

0.15

0.00

NIGTB 05/13/21

0.30

0.15

0.00

NIGTB 06/10/21

0.30

0.20

0.00

NIGTB 07/01/21

0.30

0.20

0.00

NIGTB 08/26/21

0.40

0.20

0.10

NIGTB 09/09/21

0.40

0.20

0.10

NIGTB 10/14/21

0.40

0.25

0.10

 


Money Markets

System liquidity continued to dwindle off the back of FX intervention related outflows, opening up c.N229Bn positive (24.47% lower D/D). Money market rates remained stable, with OBB and OVN rates closing at 1.13% and 1.44% respectively.

 

We expect rates to remain stable for the rest of the week, especially with OMO maturities of N419Bn expected to hit the system tomorrow.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

1.13

1.25

Overnight (O/N)

1.44

1.50

 

FX Market

Volumes traded in the I&E FX market dipped further for a second consecutive session, dropping by 65% to close at only $35million in value traded, and leaving the closing rate unchanged at N390.25/$. The Apex bank once again intervened in the market, selling c.$41million around N390.00/$ (N2.25 lower D/D) to foreign portfolio investors looking exit the Nigerian markets. 

 

Rates in the parallel maker market also remained fairly stable opening the week, with the cash rate unchanged at N495.00/$ while the transfer market appreciated by N1.00 to close at N504.00/$.

 

In what can be termed 'Circular Day', the CBN released another two circulars revising operational guidelines for various market segments. The first, titled "OPERATIONS OF DOMICILIARY ACCOUNTS", served as clarifications for guidelines on operations of domiciliary accounts, stressing that ordinary account holders be allowed unrestricted use of their electronic/wire transfer funds for 'eligible transactions' while existing regulations on cash lodgements remain in place. The second circular titled "AMENDMENT TO PROCEDURES FOR RECEIPT OF DIASPORA REMITTANCES", saw the Apex bank revert from its previous stance on dollar remittances into the country by allowing beneficiaries of these remittances receive the inflows in FX (USD) either in cash or in their ordinary domiciliary accounts.

 

Through both circulars, the Apex bank hopes to improve the liquidity in the retail FX market by encouraging more FX inflows into Nigeria through diaspora remittances, with a view to bringing down the rates on the parallel market with the anticipated supply.


FX Market

Current (N/$)

Previous (N/$)

CBN Spot

379.00

379.00

CBN SMIS

380.69

380.69

I&E FX Window

390.25

390.25

Cash Market

495.00

495.00

Transfer Market

504.00

505.00

 

Eurobonds

Yields on sovereign papers in the Sub-Saharan Africa space took a hit in today's trading session following lower oil prices as the OPEC+ failed to conclude on an agreement of extensions of crude oil production, the ANGOLA papers the most hit. Yields on the NIGERIA Sovereign papers also rose, moving higher by c.2bps on the average across the sovereign curve. We noted the weakness mostly at the mid- to long-end of the curve.

 

The NIGERIA Corporates on the flip side continued to strengthen, with demand noted on some of the tracked papers. The Zenith 2022s led the gainers as yields dipped by c.27bps on the paper, with other gainers ACCESS 2021s (1bps) and FBNNL 2025s (3bps).


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd. 


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