The Nigerian Treasury bill trades quiet, cold as the benchmark curve stayed flattish at 5.78%, according to analysts’ market report. In the foreign exchange market, Naira is approaching N500 to a dollar resistance level amidst as arbitrage activities spike.
Currencies traders told MarketForces Africa that the Central Bank of Nigeria has no capacity to meet legitimate demand from individual and corporates amidst low accretion into the external reserves.
Nigeria’s external reserves at $34.2 billion barely covers imports bills for the next five months and significant chunk of the nation’s external position is obligations to investors.
Analysts said the unification of official and autonomous foreign exchange rate would attract inflow in the short-term as demand for dollar use in Nigeria skyrockets. Though, disparate remittance has been noted to be cold, falling by more than 20% in 2020 according to World bank report.
Treasury Bill Rate Prints at 5.78% as Naira Hits Resistance Level
Godwin Emefiele, CBN Governor
In the fixed income space, investors have been on the sideline watching development that could possibly trigger an upward rates repricing following retail investors sell-offs in the equities segment.
Meanwhile, pressure has started building up in the financial system again after a previous ease reported on Tuesday due to inflow from matured open market operations bills.
Chapel Hill Denham said in a note that financial system liquidity tumble from N391.05 billion on Tuesday to N147.31 billion after the market absorbed the effect of the N55.5 billion open market operations maturity.
It also noted that activities in the Standing Lending Financing (SLF) window and Standing Deposit Financing (SDF) window declined. However, repurchase agreement (REPO) transactions spiked; signaling demand for near-term financing.
Analysts said market reaction to these trends positioned the open buy back and the overnight rates at 14.33% and 14.83% respectively; representing a dip of 2.33 and 2.16% points respectively.
Meanwhile, analysts explained that the fixed income market continued to trade mostly quiet on the short-end of the curve. The Nigerian Treasury bill space recorded little or no trade, according to Chapel Hill Denham as investors await the official release of a new issuance calendar.
However, the Nigerian Treasury Bill benchmark curve printed flat, closing the day at 5.78% while analysts said they saw some bullish pressure on the long-end of the open market operations benchmark curve.
Particularly in the Mar-22 bill, which resulted in a contraction of 3 basis points bps to close at 9.28%. This was triggered by the re-investment of the N55.5 billion open market maturity, analysts noted.
“There were bullish sentiments in the secondary bond market particularly in the mid-segment of the curve. We believe investors currently prefer the intermediate-term maturities because their yields price in their risks compared to the long-term maturities.
“Overall, the bond benchmark curve contracted by 6bps to 13.19% on Wednesday. We expect secondary market activities to pick up for the rest of the week, albeit, at a slow pace since there is no major expectation of an auction”, Chapel Hill Denham said.
In a related development, Naira appreciated marginally, by 0.23% or 23 kobo on Wednesday, closing at 411.06. However, the parallel market exchange rate closed flat at N4980 as the exchange rate approaches the N500 resistance level.
External reserve depleted marginally from US$34.24 billion on 28th May to US$34.23 billion, according to data from the CBN website.
However, the CBN explained that external reserves dropped by N640 million in May reflecting sales to the foreign exchange market and third-party payments.