Nigeria Foreign Reserves Hit $38.9bn –Central Bank Of Nigeria

Nigeria’s external reserves have continued to swell up by 5.7 per cent to hit $38.94 billion. The reserves, which opened the year at $43.5 billion had declined by 15.6 per cent within the year to a low $36.69 billion as at June 4, 2014, before it began a steady increase.

The Godwin Emefiele-led administration at the Central Bank of Nigeria (CBN) had expressed its resolve to grow the nation’s reserves so as to build a strong buffer against external shocks.

The steady increase in recent times, according to the CBN, is due to moderation in the rate of depletion to defend the naira as well as increase accretion. Although the reserves are still down by 10.5 per cent year-to-date, they had improved month-on-month by 4.7 per cent and 6.1 per cent when compared to the lowest figure for the year on June 4. Year-on-year, the reserves were down by 17 per cent as they stood at $46.87 billion on July 24, 2013.

The naira has remained stable at around N161 – N162 to the dollar on the inter-bank market and N155.75 on the official window on the back of support from dollar sales by some energy companies and offshore investors buying local debt. The Monetary Policy Committee (MPC) of the CBN had at its meeting last month welcomed the moderation in the rate of depletion in external reserves, noting that reserves accretion needed to improve much faster to provide a strong and more resilient buffer to fiscal operations.

The committee, however, noted that a gradual reduction in the country’s import bills through domestic production of some of the major food imports should be a key element in the overall reserves accretion strategy.

Meanwhile, the Open Market Operation (OMO) and Primary Market Auction (PMA) maturities totaling N340 billion are set to hit the money market, dealers are expectant of moderation in rates this week.

The apex bank mop up on Wednesday and Friday pushed up rates last week by an average 56 basis points (bps) week-on-week (W-o-W), a mild dip from a peak of 11.2 per cent on Wednesday.

“We expect liquidity to ease moderately next (this) week, on the back of OMO and PMA maturity of N150 billion and N190 billion respectively, softening liquidity mildly,” dealers from an asset management and investment company, Afrinvest (West) Africa said.

The CBN mopped up approximately N400 billion on Wednesday. This had significant impacts on the systemic liquidity considering the provisions for Wednesday’s Retail Dutch Auction System (RDAS) auction and the fact that there were three working days within the week. The Open Buy Back (OBB) and Call rates traded between 11 per cent and 12 per cent levels during the trading session but settled at 11.6 per cent and 11.8 per cent respectively, just as the six months inter-bank rate also closed at 13.9 per cent.

Similarly, the treasury bills market was mildly impacted by the liquidity mop up of the CBN, in addition to the usual end of month sell-offs by traders.

Dealers also hoped that in the long term, institutions, especially the Pension Fund Administrators (PFAs), should reassess their position in the market during the month based on statutory requirements.

“This should assist in renewing demand in the fixed income market given the high proportion of investment required in that space,” the dealers stated.

Source: The Sun