By Babajide Komolafe
Interbank money market experienced net outflow of funds to the tune of N195.5bn in February, while foreign exchange demand fell by 19.7 per cent, says Financial Market Dealers Association (FMDA).
“The month recorded total outflows of N623bn against the total inflows of N427.977bn,” the Association said in its monthly economic and financial report for February.
Reviewing development in the money market during the month, the report said “Market behaviour was mixed in the month as rates responded to the inflow and outflow of funds in the month. Rates trended up gradually in the first week of the month to signal net outflow of funds as at close of business in January 2011.
“The upward move-ment continued into the second week, and moderated in the third week as a result of N233.05bn Federation Accounts Allocation (FAAC) funds, N164.927bn for matured bills and N30.0bn for personnel cost funds.
From a weekly average of 6.9271 per cent for Call and 8.4479 per cent for 7 days money in the first week of the month, rates moderated marginally upward to 9.6910 per cent for Call and 10.3833 per cent for 7 days money in the second week.
“Rates moderated downward early in the third week in response to N30.00bn personnel funds that hit the system, and further down in the fourth week as a result of N233.05bn FAAC funds and N164.927bn matured bills.
“With the quantum of liquidity in the system from the third week, the impact of the foreign exchange and Treasury bills funding recorded in the second week was neutralised, and by extension, the Bond auction in the third week and Treasury bills in the fourth week as rates stabilized and moderated at a weekly average of 9.6042 per cent for overnight/Call and 10.1667 per cent for 7 days money in the third week and further down to 8.0972 per cent for overnight/Call and 9.0139 per cent in the fourth week.
“The month recorded total outflows of N623.42bn – foreign exchange auction of N340bn – NNPC with-drawal inclusive; Bond auction N66.50bn and Treasury bills auction of N216.92bn against the total inflows of N427.977bn through FAAC funds N233.05bn, Matured bills of N164.927bn, and Personnel fund N30.0bn.”
In the foreign exchange market, “The Wholesale Dutch Auction System (WDAS) experienced moderation, in terms of volume demanded in the month when compared to the previous month. The demand recorded at the first four auctions was quite lower when compared with the corresponding period in the previous month.
The expectations would majorly be on how well CBN manages the foreign exchange market, and meets the market demand for foreign exchange in the year. The market demand dropped by 19.76 per cent in the month against the figure obtained in the previous month. The CBN offered $1.90bn and sold $1.79bn against $2.00bn sold in January 2011.
“Our findings revealed that the moderation recorded in the volume demanded at the WDAS was accounted for by the dollar injection from Nigeria National Petro-leum Corporation (NNPC) and the oil multi-nationals sold $575m. In the corresponding month in 2010, CBN sold $1,950m.