The Central Bank of Nigeria sold $9.488 billion at the bi-weekly foreign exchange auction in four months, while the interbank money market however, recorded net ouflow of N317.6 billion in April.
According to the monthly financial and economic report for April released by the Financial Market Dealers Association (FMDA), the apex bank sold $9.488 billion from January to April while end users demanded $11.499 billion.
In April, the apex bank offered $2.20bn and sold SD$2.20bn against $3.386 billion sold in March 2011. CBN sold $1.79 billion in February and $2.0 billion in January 2011.
Reviewing money market acitivities in April, the report showed that the market experienced ouflows of N723.56 billion as against inflow of N404 billion. The report said “the month recorded total outflows of N723.56 billion – foreign exchange funding of N415.11 billion – autonomous sources inclusive; Bond auction N70.00bn and Treasury bills auction of N238.45 billion against the total inflows of N404.92 billion through FAAC funds – N203.79.billion and Matured bills of N201.13 billion.
“Market tightened up in the month of April as rates maintained double digits for Overnight/Call money. The Monetary Policy Rate (MPR) was increased in the previous month from 6.50 per cent to 7.50 per cent to reinforce the Central Bank of Nigeria’s position on inflation and price stability. Consequently, pricing of money market products were readjusted in line with the changes in the interest rates benchmarks. From a net balance below N50 billion as at month ended March, rates recorded upward swing across all the tenors to signal illiquidity in the system.
Rates moderated late in the third week as a result of N203.79 billion from the N424.578 billion appropriated FAAC funds. What accounted for the sharp upward movement in the interbank market rate from the second week through the third and fourth weeks, with minor moderation in the third week were: huge outflows occasioned by foreign exchange funding of $2.20 billion (approximately N315 billion), Treasury bills (PMA & OMO) of N238.45 billion and the monthly Bond funding of N70 billion.
Importantly, the insignificant impact of the matured bills in the month could be tied to the concurrent huge outflows through the Nigerian Treasury Bills auctions – instrument used by the Central Bank of Nigeria to mop the liquidity in the system. On a weekly average, rates moved from 11.17 per cent for Call and 11.72 per cent for 7 days money in the first week of the month,
moderated marginally upward to 11.24 per cent for Call and 11.87 per cent for 7 days money in the second week, and subsided to 10.40 per cent for Call and 11.07 per cent for 7 days money in the third week due to injection of funds – FAAC and Matured bills.