By Babajide Komolafe

For the second consecutive week, the nation’s external reserves fell by $458 million to $32.576 billion.

Meanwhile, FGN Bonds on the average lost 60.6 kobo of their value last week as yields rose in response to the increase in Monetary Policy Rate (MPR) on Tuesday.

According to the movement in foreign reserves published by the Central Bank of Nigeria (CBN) on its website, external reserves fell to $32.575 billion from $33.033 billion the previous week.

On Monday, it fell marginally to $32.982 billion and further to $32.969 billion on Tuesday. On Wednesday, it fell sharply by $428 million to $32.541 billion but rose slightly to $32.576 billion on Thursday.

It will be recalled that the reserves fell by $588 million the previous week. Consequently, the reserves have fallen by $1.046 billion in two weeks, reflecting increased pressure on the external reserves, as the nation spends more dollars on imports than it earns from exports.

Should this trend persist, there would be less dollar supply in the foreign exchange market leading to further depreciation of the naira. Also there would be less dollars to fund imports and foreign travels and could lead to foreign exchange users paying more for dollars.

Meanwhile, FGN Bonds on the average lost 60.6 kobo of their value last week as yields rose in response to the increase in Monetary Policy Rate (MPR) on Tuesday.

On Tuesday, the Central Bank of Nigeria (CBN), in a bid to further tighten money supply in the economy, announced the second increase in the MPR to 8.0 per cent from 7.5 per cent, citing “need to address inflationary expectations associated with excessive liquidity and pressure on foreign exchange market.” To complement this, the CBN also increased the cash reserve requirement of banks to 4.0 per cent from 2.0 per cent effective from June 8th. The apex bank had on March 22nd raised the MPR by 100 basis points to 7.5 per cent for same reason.

According to movement in FGN Bond prices and yields published by Financial Market Dealers Association (FMDA), all the 15 FGN Bonds being traded experienced increase in yield with prices equally trending down. On the average yields rose by 20 basis points while prices dropped by 60.6 kobo.

In terms of yields, the three top gainers were; 9.45% FGN Jan 2013, 5.5% FGN Feb 2013 and 10.5% FGN Nov 2013.

In terms of price decline, the top losers were: 15% FGN Nov 2028, 10.7% FGN May 2018, 9.35% FGN Aug 2017 and 12.49% FGN May 2029.

The rise in yields and decline in prices were attributed to the rise in interbank interest rates in response to the MPR increase.

Interbank interest rate rose steadily throughout the week, with the interest rate on the secured Open Buy Back (OBB) lending rising by 79 basis points to 10 per cent on Friday from 9.21 per cent on Monday while interest rate on Call, 7 Days, and 30 Days tenors rising by 75 basis points on the average.

Interest rate on Call lending rose by 87 basis points to 10.75 per cent while 7-Days and 30 Days lending rose by 75 basis points and 63 basis points respectively to 11.25 and 12.42 per cent.