Banks’ demand deposit fall by N2tr in August
Naira appreciates as CBN injects $503.5m

By Babajide Komolafe

COST of funds in the interbank money market is set to drop further in response to inflow of N413 billion this week.

Last week, short term cost of funds dropped by 23 per cent on the average following inflow of N123.53 billion from matured treasury bills.

The inflow moderated the impact of outflow of N302.83 billion via FGN Bond issue of N243.7 billion by the Debt Management Office (DMO) and treasury bills (TBs) issue of N59.13 billion by the Central Bank of Nigeria (CBN). The TBs comprised 178-day bills worth N55.01 billion and 184-day bills worth N4.12 billion.

As a result, interest rate on Collateralised (Open Buy Back, OBB) fell by 22.33 basis points (bpts) to 13.67 per cent last week from 36 per cent the previous week. Similarly, interest rate on Overnight lending dropped by 23.75 bpts to 14.25 per cent last week from 38 per cent the previous week.

This trend is expected to continue this week baring any special TB issue by CBN to mop-up anticipated excess liquidity in the interbank money market.

Vanguard analysis revealed that the market will this week receive inflow of N413.77 billion from maturing TBs. The TBs comprise: 91-day bills worth N28.69 billion; 182-day bills worth N33.49 billion; 252-day bills worth N0.28 billion; 363-day bills worth N283.13 billion; and the 364-day bills worth 68.18 billion.

The inflow will offset impact of expected outflow of N130.36 billion via TB issue comprising 91-day bills worth N28.69 billion; 182-day bills worth N33.49 billion and 364-day bills worth 68.18 billion.

Banks’ demand deposit fall by N2tr in August

Meanwhile, banks’ demand (current account) deposit fell by N2 trillion in August due to increased investment in high yielding government securities.

This revelation came from the latest Depository Corporations survey which showed that banks’ demand deposit  fell by 5.75 per cent to N8.57 trillion in August from N10.46 trillion in July.

The report   showed 1.55 per cent  month-on-month (m-o-m) decline in Broad Money to N21.85 trillion in August as  Net Domestic Assets (NDA) fell m-o-m by 9.91 per cent  to N12.12 trillion while Net Foreign Assets (NFA) increased m-o-m by 11.31 per cent  to N7.56 trillion.

The decrease in broad money followed a 0.73 per cent m-o-m growth in quasi money (near maturing short term financial instruments) to N11.96 trillion and a 4.17 per cent  fall in narrow money to N9.88 trillion.

Naira appreciates as CBN injects $503.5m

The CBN continued its intervention in the foreign exchange market last week by injecting $503.5 million.

On Monday the apex bank injected $195 million into the interbank foreign exchange market. In the wholesale Secondary Market Intervention Sales (SMIS), of the inter-bank Foreign Exchange market, the apex bank  auctioned $100 million  and also intervened in the Small and Medium Enterprises (SMEs) and invisible segments, with the sum of $50 million and $45million respectively.

The apex bank injected another $308.5 million on  Friday, aimed at boosting liquidity in the forex market post  Monetary Policy Committee  (MPC) meeting held during the week.

Announcing the injection on Friday, Acting Director, Corporate Communications Department, CBN,  Mr. Isaac Okorafor, said that  the latest intervention of the CBN in the retail segment was part of the regular interventions of the apex bank, in line with its commitment to sustain liquidity to meet genuine requests in the market.

While warning against speculations in the market, Okorafor said the CBN had put necessary checks in place to guard against the activities of speculators.  He stressed the determination of the bank to continue its forex intervention. He encouraged genuine users of foreign exchange to approach their banks, as the banks had enough forex to meet their demand.

With the $503.8 million injected last week, the apex bank has injected $1.05 billion into the forex market in two weeks. This is beside the bi-weekly dollar sales to bureaux de change across the country.

Reflecting the impact of these injections, the naira appreciated by N1.5 last week in the parallel market. Investigation revealed that the parallel market exchange rate dropped to N363.50 per dollar at the close of business last week from N365 per dollar the previous week.

At the Investors and Exporters (I&E) window, the naira was relatively stable as the indicative exchange rate dropped marginally to N360.4 per dollar last week from N360.39 per dollar the previous week.

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