There are insinuations that the Central Bank of Nigeria (CBN) has begun to make moves to securitize the excess cash reserve requirement balances of local banks by offering them short-dated zero-coupon special bills instead of releasing cash balances.
It was learnt that the special bills will, however, be tradable, between banks, retail and institutional investors. Further clarification of the issue and pricing of these new instruments is expected from the CBN in the coming days.
And of course, it was expected that the market would open on a cautious note, as the expected supply of instruments from this new issue of special bills is aimed to negatively impact rates on current treasury bills in the market.
Reports by Proshare claimed that the Open Market Operation (OMO) maturities of N341Bn dropped today, Wednesday, December 2, boosting system liquidity up by 176% to open the session at N628Bn.
The money market rates consequently dropped in the face of the improved liquidity, closing at 0.75% and 1.00% for OBB and OVN rates respectively.
The expectation was that the rates to remain stable in the interim, with outflows from Retail FX interventions not expected until late in the week.
Also, the traded volumes in the I&E FX market jumped up 380% with $168.57million changing hands as in a very active session.
The closing rate appreciated by N1.00 to close at N394.00/$ as liquidity improved following the CBN’s continued intervention in the market.
The parallel market showed exactly how shallow the retail-side of the markets was yesterday as market players reacted negatively to the changes in international remittances following the Apex bank’s circulars released on Monday.
The cash rate appreciated by 7.07% (N35.00) in a single day as market players shied away from showing bids on the greenback for most of the session, with the rate settling at N460/$ at the close of the session.
The transfer rate also appreciated, albeit at a slower rate, closing 1.79% (N9.00) stronger at N495.00/$.
Yields on the Nigeria Sovereigns halted its recent rising trend in a positive session which saw demand return to the sovereign curve.
Bids improved across the board, as foreign investors picked up the sovereign papers in a relatively active trading session as global oil prices stabilized. Consequently, yields compressed by c.6bps on the average across the sovereign curve.