26 July 2012, Sweetcrude, Lagos – Local and international financial market update
NIGERIA: Nigeria’s central bank kept its benchmark interest rate at a record high and raised commercial banks’ reserve limits to help bolster the naira and control inflation. The Monetary Policy Committee left the policy rate at 12 percent, Governor Lamido Sanusi told reporters in the capital, Abuja today. That was in line with 12 out of 13 economists surveyed by Bloomberg News. The amount of cash as a percentage of deposits that commercial banks must hold with the central bank was increased to 12 percent from 8 percent while the net open foreign exchange position was cut to 1 percent from 3 percent, Sanusi said.
Following the MPC meeting and the revisions made to the net open positions for banks on USD, there was a lot of volatility in the foreign exchange market yesterday, which dropped as low as USD/NGN- 157.30 in intraday trading.
CHINA: China may refrain from stepping up its monetary stimulus or increasing spending because measures now in place are sufficient to support growth, the International Monetary Fund’s top official in the nation said. Lee’s comments reflect confidence at the IMF, which last week cut its China growth forecasts three months after releasing updated projections, that the pace of expansion will accelerate in the second half of 2012. Premier Wen Jiabao’s government enacted two interest-rate cuts in a month and accelerated approval of investment plans to stem six quarters of deceleration in the world’s second-largest economy.
Bonds – Bond yields up 45-60bps across the 2017-2019 maturities and 91bps on the 2015 maturity which had been bought quite aggressively in the run up to the auction yesterday. We could possibly still see yields up at the 17% levels as market adjust to the new developments. Tighter Liquidity and higher lending rates we expect to see reduced appetite not only for FX but also for securities which will ultimately push yields up.
Bills – In reaction to the hike in CRR, it was a bearish session on Wednesday with yields coming up 80 – 120bps on all traded bill maturities, the sharp reaction is due to the sell-off in the view of higher cut-off rates at the auction and need to raise liquidity to provide for new cash reserve requirement. Yields will come off in today’s session due to auction cut-off rates printing lower than market expectation.
Money Market – OBB up another 50bps to 16.00% and O/N 150bps to 17.50% due to new CRR rate at 12percent, about ngn416 bio has been withdrawn from the system to meet the new reserve requirement.
CBN WDAS SESSION
AMOUNT ON OFFER – $ 250MIO
AMOUNT SOLD – $ 217.07MIO
MARGINAL RATE – $/NGN 155.84
CBN WEIGHTED AVERAGE RATE – $/NGN 155.89
No. OF BANKS- 15
Hi Low Close Prev.Close
USD/NGN 159.95/05 157.30/40 159.95/05 160.68/78
NIBOR (%) LIBOR (%)
O/N 17.5000 USD 1 month 0.2442
7 Day 18.2500 USD 2 month 0.3358
30 Day 18.8750 USD 3 month 0.4481
60 Day 19.2083 USD 4 month 0.5481
90 Day 19.4167 USD 6 month 0.7264
USD 12 month 1.0615
Y/Y Consumer Inflation June 2012 : 12.9%
FX Reserves: 23 July 2012 (USD bn) 36.391
Source: FMD and CBN