Maturing T- bills, FAAC inflows to bring down interbank rates

There are expectations that inflow from maturing treasury bills and Federation Account Allocation Committee (FAAC), inflows expected to settle in this week, will bring down cost of funds.

According to dealers, there will be treasury bills auctions on Wednesday, May 3, 2017, via primary market, viz: 91-day bills worth N45.177 billion, 182-day bills worth N23.432 billion and 364-day bills worth N82 billion which will be more than offset by maturing treasury bills worth N208.808 billion.

The maturing treasury bills are expected to be through primary and secondary market, viz; 91-day bills worth N45.177 billion, 182-day bills worth N18.653 billion, 364-day bills worth N82 billion and 279-day bills worth N62.977 billion.

Hence, with the net inflow from maturing treasury bills and FAAC inflows expected to settle in this week, “we expect downward pressure on the interbank rates,” dealers from Cowry Assets Management Limited.

The Central Bank of Nigeria (CBN), will be conducting a T-bills auction of net N150.6 billion but its impact on liquidity according to another dealer  is expected to be taped by a scheduled maturity of the same amount.

The dealer said that debits from successful bids at foreign exchange (FX) whole sale intervention auctions as well as Open Market Operation (OMO) auctions will drag liquidity this week.

However, the dealer said “we expect money market lending rates to trend northward from current levels. We believe improved liquidity level contributed to the bullish sentiment in the local debt market this week but anticipate a reversal in this week’s trading sessions as the CBN mops up liquidity whilst investors also redirect attention towards the primary market auctions in the money market.”

Nigeria sold N107.64 billion ($353 million) in treasury bills on Friday in a move to soak up excess liquidity from the banking system and curb pressure on the currency, traders said.

The Central Bank sold N54.42 billion in the 167-day open market operations (OMO) treasury bills at 18 percent and 55.22 billion naira paper at 18.5 per cent.

The effect of the sale was countered by additional liquidity from the repayment of matured bonds forcing overnight lending rate down to five per cent on Friday from 30 per cent at the start of the week.

Traders said banking system liquidity was N246 billion in credits on Friday, up from N206.96 billion in deficit two weeks ago.