CBN begins tightening of liquidity with seven to 30-day maturity Forwards sale
Indications have emerged that the combination of foreign exchange (forex) and Treasury Bills (T-Bills) auctions by the Central Bank of Nigeria (CBN) last week, calmed the quantity of money in circulation making investors to scout for naira to pay for their transactions.
CBN had on Friday, ended the weekly transactions with a $418 million at the retail-SMIS at a marginal rate of N310/$, with the airlines, agriculture, petroleum and raw materials/machineries sub-sectors benefitting from the exercise.
On Monday, the bank began sale of short-tenured forwards of seven to 30-day maturity to meet demand of manufacturers and all other foreign exchange users, a sharp change from the ongoing 60-day tenure.
The apex bank had earlier in the week, conducted forex auctions on other days except Wednesday, selling $150 million at the interbank and Forwards market, and a two-time intervention for the Bureau De Change operators.
The margin at which banks borrow and lend among themselves rose in all the trading days, settling at 4.2 per cent and 3.8 per cent higher at the weekend for Open Buy Back and Overnight respectively, compared to previous week’s record.
Besides, the money market rates also rose further mid-week as T-Bills maturity worth N239.4 billion was offset simultaneously by a rollover of the same amount.
Analysts are upbeat this week that barring changes in inflow expectations, rates will trend higher this week as the monthly auction by the Debt Management Office and Federal Government’s savings bond debit will be due.
It would be recalled that the Acting Director of Corporate Communications of the CBN, Isaac Okorafor, said even in the weeks ahead, apex bank will sustain the interventions in all segments of the market.
According to him, “These significant injections of foreign exchange into the market should reassure all foreign exchange users of our determination to continue to meet all legitimate FX demand in the market while striving to achieve exchange rate stability in the market”.
The feeling of industry follower is that the recent moves by the apex bank to ease forex liquidity constraints and force the convergence are best moves as the long rally in the parallel segment seems to have come to a halt.