—-as CBN injects $150m
Interest rates in the interbank money market rose sharply to N51 percent yesterday as banks scramble for naira to fund the $4.2 billion sold by the Central Bank of Nigeria (CBN) on Monday.
Meanwhile, the naira depreciated marginally to N284.83 per dollar in the interbank foreign exchange market despite $150 million supplied by the CBN through the 15 banks appointed as Primary Foreign Exchange Dealers (PFXDs).
On Monday the CBN had sold $4.2 billion in spot and futures to clear backlog of matured foreign exchange obligations of banks.
This move, according to a Bank Treasurer, who spoke on condition of anonymity, exceeded market expectations and triggered demand for funds in the interbank money market. “Our challenge now is how to source for naira to fund the dollars sold by CBN, and we are talking about over N1 trillion, it is quite challenging”, he told Vanguard.
The intense competition for funds sent cost of funds to its highest level this year, with short term interbank interest rates rising by average of 165 percent yesterday.
According to data provided by Financial Market Dealers Quote (FMDQ), interest rate for Overnight lending shot up to 51 percent from 18.7 percent on Monday, indicating increase of 168 percent. Similarly, interest rate for Securitised Lending (Open Buy Back) rose to 45 percent from 17.3 percent on Monday.
Naira depreciates
The revived interbank foreign exchange market entered the second day yesterday; with the CBN supplying $150 million to create liquidity for trading. Market sources confirmed to Vanguard that the apex bank sold $10 million to each of the 15 PFXDs at exchange rate of N281 per dollar. The PFXDs in turn traded the dollars with other banks in the interbank market.
However the naira depreciated in both the spot (immediate delivery) and futures (future delivery) segments of the market yesterday. Data provided by FMDQ showed that the naira depreciated in the spot market by N2.98 or 1.1 percent to N284.83 per dollar, from N281.85 per dollar on Monday.
In the Futures market, the naira depreciated across all the tenors. The exchange rate for Seven Days (7D) forward rose by 10.5 percent to N284.05 per dollar from N257 Monday. 14D futures rose by 9.8 percent to N287.3, while 1M futures rose by 9.6 percent to N292.7 per dollar. Exchange rate for 2M futures rose by 9.1 percent to N297.82, 3m futures rose by 7.6 percent to N302.13, 6m futures rose by 4.5 percent to N302.13, One Year (1Y) futures rose by 0.5 percent to N307.95 per dollar.
Naira appreciates in parallel market
The naira however appreciated to N338 per dollar at the parallel market from N345 per dollar on Monday. President, Association of Bureaux De Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe attributed the appreciation to decline in activities in the parallel market. The told Vanguard, “The market is still in a wait-and-see mood. Operators want to observe the trend in the revived interbank market to ascertain the direction of the naira and the implementation of the flexible exchange rate regime.”
