22 July 2016, Sweetcrude, Lagos — Local and international financial market products and services update.
NIGERIA: The Central Bank of Nigeria (CBN) will today fund the one-month forward contracts of $697 million on the interbank FX market, effectively improving dollar liquidity in the market, as the accounts of customers that hedged against the dollar through their banks last month will get their accounts credited.
Sources in the CBN confirmed that there would be the improved availability of dollars today, thus easing pressure on the naira which fell to its lowest level yesterday since the guidelines were revised last month for trading on the interbank FX market.
FX: Yesterday, spot market was choppy for most of the trading day owing largely to CBN relaxed stance on NGN levels following interactions/feedback from the previous week’s road show. The indicative range for yesterday $/NGN 291.90 – 309.00.
FIXED INCOME: There was N131bn OMO maturity yesterday. OMO auction announcement brought out more sellers. N76bn of 357day paper was sold at 20.39% yield. This and Wednesday’s extra N77bn sale on the 1-year has now taken out all the inflow. Bond and T-bill yields still pushing higher with average yield testing year highs of 15.40% and 14.33% respectively. We still expect sentiments to remain bearish ahead of the MPC next week Tuesday.
CHINA: China’s weakening currency has triggered an increase in the amount of cash leaving the country, according to analysis by Goldman Sachs Group Inc.
The U.S. bank estimates $49 billion worth of foreign-exchange outflows in June, compared with $25 billion in May. Goldman’s analysis came after China’s top currency regulator released data showing sustained demand for foreign-exchange. The Yuan fell 1.1% against the dollar and 2.2% versus a trade-weighted index last month.
The nation experienced a record flood of capital outflows in 2015 and early this year after authorities allowed the exchange rate to weaken, prompting companies to pay down foreign debt and investors to move money overseas.
U.K: Chancellor of the Exchequer Philip Hammond said he’s ready to “reset” Britain’s fiscal policy if needed to respond to turbulence caused by the decision to vote to leave the European Union.
“In the short term, our colleagues at the Bank of England will be using the monetary tools at their disposal,” Hammond said in Beijing on Friday ahead of a meeting with fellow Group of 20 finance ministers in Chengdu, China. “Over the medium term, we will have the opportunity with our Autumn Statement, our regular late-year fiscal event, to reset fiscal policy if we deem it necessary to do so.”
The fallout from last month’s Brexit vote is expected to hit tax receipts in the coming months, with growth forecasts for the U.K. economy lowered. Prime Minister Theresa May has said the government has not abandoned its goal of returning the public finances to surplus but is no longer seeking to do so by the end of the decade.
COMMODITIES: Oil is set for a weekly decline as the U.S. heads toward the end of its summer-driving season with ample crude and motor fuel stockpiles.
Futures dropped 0.9% in New York, down 3.5% this week. U.S. crude and gasoline supplies are at the highest seasonal levels in at least two decades, according to data from the Energy Information Administration. Record June motor fuel consumption wasn’t enough to make a dent in inventories that ended the month at the highest since 1984 for this time of year. The summer driving season ends Sept. 5 on Labor Day.
Macro Economic Indicators
Inflation rate (Y-o-Y) for June 2016, 16.50%
Monetary Policy Rate current 12.00%
FX Reserves (Bn $) as at Jul 20, 2016, 26.348
Money Market Highlights
30 Day 17.9243
90 Day 18.4765
180 Day 19.3010
USD 1 Month 0.4874
USD 2 Months 0.5770
USD 3 Months 0.7016
USD 6 Months 1.0202
USD 12 Months 1.06675
Tenor Maturity Yield (%)
91d 20-Oct-16 14.15
182d 19-Jan-17 16.29
364d 06-Jul-17 15.90
2y 30-May-18 15.10
3y 29-Jun-19 14.78
5y 13-Feb-20 15.36
Indicative Currency Exchange Rates
USDNGN 285.00 290.00
EURUSD 1.0930 1.1132
GBPUSD 1.3082 1.3286
USDJPY 106.17 106.20
USDCHF 0.98005 0.9901
GBPEUR 1.1849 1.2054
USDZAR 14.1238 14.3272
JPYNGN 2.8155 2.8164
CHFNGN 302.61 304.30
EURNGN 329.10 330.46