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N114bn public sector fund halts rate rise

The rising trend of interbank interest rate following the increase in monetary policy rate was halted by the inflow of N114 public sector fund in the latter part of the week.

It would be recalled that the Central Bank of Nigeria (CBN) increased the Monetary Policy Rate (MPR) by 100 basis points to 7.5 per cent on Tuesday. The next day, interbank interest rate rose equally by 100 basis points.

Interest rate on Call, 7-Days and 30 Days rose to 10.7, 11.3 and 12.4 from 9.7, 10.2 and 11.2 per cent respectively.

Rates, however, stabilised in the last three days of the week due to inflow of N114 billion public sector fund comprising N92.3 billion personnel cost and N22 billion overhead cost.

The naira, however, recorded mixed fortunes in the foreign exchange market. while it depreciated in the official market, it recorded marginal appreciation in the interbank segment and stabilised in the bureaux de change and parallel market segment.

In the official market, the naira depreciated by 26 kobo as the official exchange rate rose to N151.27 per dollar from N151.01 the previous week, in response to rising demand. Foreign exchange demand at the bi-week foreign exchange auction conducted by the Central Bank of Nigeria (CBN) rose by 16 per cent to $1.05 billion from $908 million the previous week.

At the interbank market, the naira appreciated by 37.75 kobo as the interbank rate dropped to N155.3950 per dollar from N155.7725 per dollar the previous week. The appreciation was occasioned by autonomous foreign exchange supply from four firms namely: Niger-Delta Development Commission (NDDC), Nigeria Liquefied Natural Gas (NLNG), Total, and the Nigeria National Petroleum Corporation (NNPC).

Meanwhile, the CBN  commenced sale of foreign exchange forwards last week but  said  only  trade-backed bids would qualify.

It also limited the minimum bid for foreign exchange forwards to $500 million per bid while also banning banks from transferring such foreign exchange in the interbank market.

To mark the commencement of the foreign exchange forward, the apex bank released the Revised Guidelines for the Operation of the Foreign Exchange Market: Wholesale Dutch Auction System Forwards (WDAS-FWD).”

The guidelines signed by the Director, Financial Markets Department, O.F. Owolabi, among other things stated:

“The CBN’s objective for boosting trading liquidity in the forwards market is to offer risk management support to the exchange rate risk exposures of the end-users. Therefore, all the FX forward purchases by the authorised dealers from the CBN must be trade-backed.

Authorised dealers are therefore expected to evidence the existence of the trade transactions before bidding for FX forward purchases from the CBN on behalf of their customers.”


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