In the just concluded week, Central Bank of Nigeria introduced Special Bills as part of its efforts to deepen the financial markets and further manage liquidity in the financial system.
The CBN, which mentioned that it would
continue to ensure optimal regulation of
systemic liquidity and promote efficient markets in support of economic recovery and growth, gave the features of the
Special Bills to include: a maturity period of 90 days; zero coupon, but applicable yield at issuance shall be determined by the apex bank; the instrument shall be tradable amongst banks, retail and institutional investors;
the Special Bills shall not be acceptable for repurchase agreement transactions with the CBN and shall not be discountable at the CBN window; lastly, the instrument shall qualify as liquid assets in the computation of liquidity ratio for deposit money banks.
In a similar move to facilitate an efficient flow of remmitances from Nigerians in the Diaspora – expected to boost the supply of foreign currency and reduce the demand pressure at various FX segments – the apex bank amended the procedures for the receipt of diaspora remittances.
According to its Circular issued on Monday, November 30, 2020, the amended procedures ensured that all International Money Transfer Operators (IMTO) deposit all funds in favour of beneficiaries in Nigeria into the Agent Banks’ correspondent accounts.
Then, Agent Banks (Deposit Money Banks) in Nigeria are to be responsible for the final payment to beneficiaries either in designated foreign currency cash or transfer into beneficiaries’ domicilliary accounts.
Hence, the mode of payment either in cash or transfer would now be at the discretion of the beneficiaries.
The amended procedure was a complete reversal from the general practice of remitting funds to beneficiaries in local currency, at an agreed rate between the IMTOs and DMBs.
The old practice which had denied the beneficiaries of the remitted foreign currency access to market-reflective exchange rate, would be stopped by this new procedure.
According to the CBN, its follow up instruction to all DMBs to close all the Naira General Ledgers through which the Naira remittances to beneficiaries were being funded was informed by the pushback from IMTOs benefitting from the old procedures.
Meanwhile, crude oil prices headed for a fifth consecutive week of gains, after OPEC+ managed to seal a compromise deal over its oil production policy early 2021.
The West Texas Intermediate (WTI) crude price rose w-o-w by 0.42% to USD45.90 a barrel.
Also, Brent price rose by 1.93% to USD48.71 a barrel as at Thursday, December 3, 2020 even as Bonny Light increased by 2.08% to USD48.68 a barrel.
The U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decline by 0.14% w-o-w to 488.04 million barrels as at November 27, 2020 (however, inventories have risen by 8.39% y-o-y from 447.10 million barrels as at November 27, 2019).
However, we saw a 1.76% w-o-w fall in US crude oil input to refineries to 14.04 mb/d as at November 27, 2020 (albeit, It moderated y-o-y by 19.88% from 16.79 mb/d as at November 29, 2019).
We commend the CBN on this strategic move which we expect will further boost foreign currency supply in the country – especially at the parallel (“black”) market.
CBN’s expected monthly inflow from diaspora remittances is USD2 billion. With the beneficiaries receiving their monies in foreign currency, they can now access the foreign exchange window which will offer them the best rate in exchange for their Naira.
As it stands, we expect more of the foreign currencies from this stream to flow into the parallel (“black”) market – which had witnessed acute supply shortage – as foreign currency exchange rates in this segment appear to have the highest value, relative to the other FX market segments in the country.