Rates to remain flat on N127.2bn inflow

THERE are anticipations among market players that funding rates will be flat (over around current levels) as inflows from Primary Market Auction (PMA) and Open Market Operation (OMO) maturities worth N105.7 billion and N21.5 billion (N127.2 billion), respectively hit the system.

Also, due to the N185.8 billion inflows from coupon payments this week, other dealers anticipate a bullish performance in the domestic bond market.

In another development, the Central Bank of Nigeria (CBN) issued a total of N2 trillion Open Market Operation (OMO) bills, mostly in long-tenured bills of 180 to 361 days maturity in 2021, a report by Guaranty Trust Holding Company Plc (GTCO) has revealed.

The value of the OMO bills issued in 2021 was significantly lower than the N7.1 trillion the banking sector regulator issued in 2020.

GTCO, in the report titled, ‘Nigeria’s macroeconomic outlook for 2022,’ predicted that the CBN would continue with its discretionary cash reserve requirement (CRR) debits in 2022.

It stated that this could weigh negatively on asset yield for the sector.

Furthermore, it stated that the CBN’s discretionary CRR debits posed a huge challenge to banks’ ability to create credit as 50 per cent of total Naira deposits were sterilised with the CBN as CRR and special bills.

The report noted that the relatively low yield on fixed income securities (FIS) would mount pressure on banks to intensify credit creations to the private sector, which would in turn increase competition for quality loans amongst banks and cause funding costs to inch up slightly.