Available records have shown that on January 3, 2020, the opening position of Deposit Money Banks (DMBs) in the system rose above N1 trillion for the first time since June 2016 to N1.45 trillion.
Specifically, analysts from Financial Derivatives Company Limited in their monthly Economic outlook stated that average liquidity in the banking system has followed this trend, rising by 74.70 per cent in the month of December, 2019, to close at N512.1 billion from N293.13 billion at the end of November, 2019.
The 130.06 per cent increase in liquidity, said the analysts, was partly due to Open Market Operation (OMO) repayments of N446.80 billion as well Federation Allocation Committee (FAAC) disbursements of N635.83 billion.
Average short term rates (OBB, O/N) closed at 3.44 per cent in December, 2019, reflecting a decline of 348bps from 6.92per cent in November, 2019.
According to FDC, net outflow stood at N130 billion as against a net inflow of N1.05 trillion in November.
So far, in January, total OMO sales have amounted to N481.38 billion, while OMO repayments totalled N446.8 billion.
At the interbank market, the naira traded between N306.9/$-N307/$ from December 2, 2019, to January 6, 2020. The currency lost 0.51 per cent of its value at the investors and exporters’ window to close at N364.57/$ on January 6, 2020, from N362.71/$ at the beginning of the period. In December, activities in the IEFX window increased to $6.45 billion, 23.33 per cent higher than $5.23 billion recorded in November, 2020.
FDC stated that the CBN’s directive to restrict local corporates and banks from the OMO market could be partly responsible for the increased forex demand pressure.
This is due to the fact that investors are exploring other investment outlets, including the equities market and forex market.
An increase in exchange rate has a negative impact on import dependent businesses such as companies in the manufacturing sector.
In its outlook, the FDC noted that further, depreciation of the naira is likely, considering the steady depletion of the gross external reserves level and the effect of increased demand for forex as production activities pick up pace from a slowdown during the holidays.
Meanwhile, the Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, has said the Investors’ and Exporters’ (I&E) window of country’s foreign exchange market has recorded a total investment transaction of about $50 billion since its establishment.
The apex bank had introduced the I&E window in 2017 to boost liquidity in the foreign exchange (FX) market and ensure timely execution and settlement of eligible transactions. This was part of CBN’s continuing efforts to deepen the FX market and accommodate all FX obligations
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