Nigerian interbank rates ease on expectation of budget disbursal

Nigerian interbank lending rate eased to an average of 15.25 percent on Friday, from 42.5 percent last week, after some lenders rediscounted their treasury bills to access some cash and dealers anticipated a budget disbursal.
The overnight lending rate had climbed to 80 percent on Tuesday, as banks scrambled for naira cash to pay for their foreign exchange purchases and meet other obligations.
"Many banks rediscounted their treasury bills holdings to get some cash support ... and this helped to eased the pressure on the market," one dealer said.
The central bank last month hiked the CRR on private sector deposits with commercial lenders to 20 percent, from 15 percent, to support the local currency. It also raised interest rates by 100 basis points to 13 percent.
Dealers said cash from monthly disbursal of budgetary allocations to government agencies is expected to hit the banking system by close of Friday, which should further increase available cash.
The balance that lenders hold with the central bank closed at a surplus of 93 billion naira ($504.07 million), compared with debit of over 100 billion naira last week.
The secured Open Buy back (OBB) traded at 15 percent compared with 40 percent last week, while overnight lending closed at 15.5 percent, against 45 percent last week.
Traders said cost of borrowing among banks is expected to remain stable next week as many companies tiding up their books for the year end.

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Yields rise over 200 basis points at Nigeria debt auction

Nigeria sold 53.50 billion naira worth of sovereign debt at an auction on Wednesday, where yields climbed more than 200 basis points across the board on paper with maturities ranging between 3-year and 20-year.
The Debt Management Office (DMO) said it sold 7.5 billion naira in the 3-year debt note at 15.49 percent, compared with 12 percent at the previous month's auction. The debt office had initially offered 10 billion naira of the 3-year bond.
It sold 18 billion naira worth of 10-year paper at 15.2 percent, against 12.8 percent at the previous auction, while a total of 28 billion naira of the 20-year note was sold at 15.49 percent, compared with 13 percent last month.
The debt office sold less that the initially advertised amount of the 10-year note, but more of the 20-year bond -- it DMO had initially offered to sell 30 billion of the 10-year bond and 25 billion naira in the 20-year.
Nigerian bond yields have been on the rise since the central bank hiked the benchmark interest rate to 13 percent, while concerns on falling global oil prices have led to sell off by offshore investors in Nigerian debt.

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Nigerian central bank restricts dollar holdings to curb speculation on naira

Nigeria's central bank has barred banks from holding their own funds in dollars in order to end speculative pressure on the ailing naira currency, the governor said on Thursday.
Godwin Emefiele told Reuters in a phone interview that he believed the current naira band, set last month, was "appropriately priced at this time", signalling a will to defend the currency, although it is currently trading below the band.
"We do not want speculators in this market any longer," he said. "The banks are not supposed to hold any funds (in dollars) of their own. They are supposed to buy and sell currency on behalf of customers."
The naira has been battered in recent months by the plunging oil price. Despite heavy intervention in the market, the central bank has failed to keep the currency in the new band it set on Nov. 25 when it devalued the currency by 8 percent in a bid to halt the slide in its foreign exchange reserves.
Asked whether or not the bank would devalue again, Emefiele told Reuters: "As the need arises, action will be taken. But we believe the currency is appropriately priced at this time."
The naira fell to a record low of 188.85 to the dollar after the governor's comments, well outside the bank's target band.
In its latest effort to try and support the currency, the bank issued a circular overnight stipulating that dealers had to reduce the percentage of "shareholders funds" that they could hold in dollars from 1 percent to zero.
"We are seeing some elements of speculation in the market by some banks who think the level will re-adjust further, and that is not our view," Emefiele told Reuters.
On the day of the devaluation the central bank also raised interest rates by 100 basis points to 13 percent to support the currency. "We are maintaining a tight monetary policy," he said.
Since devaluation the bank's target band has been 5 percent plus or minus 168 to the dollar, but some traders doubt the devaluation went far enough given the bleak outlook for oil prices.
Despite the new restrictions imposed overnight, Emefiele said the bank wanted to reassure the market that "if there is genuine demand ... for dollars for legitimate purposes ... it will be met."
Brent crude recovered 3 percent to above $63 a barrel on Thursday, extending a rebound from five-year lows this week but it has nearly halved since June, posing problems for Nigeria, Africa's biggest oil producer.
Nigeria has slashed its forecast for economic growth next year owing to weak oil prices, according to the budget Finance Minister Ngozi Okonjo-Iweala presented to parliament on Wednesday.
She expected oil to average around $65-$70 a barrel in 2015.
Oil accounts for about 15 percent of Nigeria's gross domestic product but provides 95 percent of foreign exchange and 75-80 percent of government revenues.
The weak naira will also probably fuel inflation, which has been stable in single digits for two years. The impact on inflation is expected to be felt in January, a headache for President Goodluck Jonathan who will seek a second term in elections scheduled for the following month.

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Nigerian overnight interbank lending rate spikes to record high

Nigeria's interbank overnight lending rate spiked further by 20 percentage points on Tuesday to 80 percent following drop in liquidity on large naira cash withdrawal by the state-owned energy company.
"The NNPC withdrew more cash from the system today, hitting hard on some banks, which have to resort to borrowing heavily from other banks to cover their position," one dealer said.
NNPC last week sold about $300 billion naira to some lenders as part of its usual month-end dollar sales and put the naira proceeds into its account with the central bank.
The cost of borrowing among banks has oscillated between a high of 70 percent and a low of 14 percent since last month, when the central bank hiked the cash reserve requirement (CRR)on private sector deposits with commercial lenders to 20 percent from 15 percent.

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Nigerian overnight rate up to 60 pct on NNPC withdrawal

Nigeria's interbank overnight lending rates spiked 15 percentage points on Monday to 60 percent, from 45 percent on Friday, after the state-owned energy firm recalled a portion of its deposits with commercial lenders to its account with the central bank, traders said.
NNPC last week sold about $300 billion naira to some lenders as part of its usual month-end dollar sales and put the naira proceeds into its account with the central bank.
"Lending rates went up today because of the NNPC cash recall and payments for foreign exchange purchased at the central bank auction," one dealer said.
The cost of borrowing among banks has oscillated between a high of 70 percent and a low of 14 percent since last month, when the central bank hiked the cash reserve requirement (CRR) on private sector deposits with commercial lenders to 20 percent, from 15 percent.
It also raised interest rates by 100 basis points to 13 percent, both moves to support the ailing naira.
The bank has mopped up 868 billion naira from the banking system over the last three weeks to meet the CRR.

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Nigerian naira gains on oil firms' dollar sales

Nigeria's naira firmed against the dollar on the interbank market on Monday, supported by dollar sales by two energy companies and a naira cash shortage in the banking system, traders said, adding that they expected further gains this week.
The local currency closed at 178.70 to the dollar, 0.66 percent firmer than 179.90 it closed at Friday.
A unit of French oil company Total sold $74 million to some lenders, while Nigerian Liquefied natural Gas (NLNG) company sold an undisclosed amount, boosting dollar liquidity.
"The market was a bit calmer today because of dollar sales by the two energy companies and the impact of tight naira cash in the system," one trader said.
"Given the way the central bank has been active in the interbank market in the past few weeks ... sentiment is in favour of further gains in the naira," another trade said.
The naira has been under pressure on concerns over falling global oil prices and depleting forex reserves, forcing the central bank to devalue last month.
The local currency has lost about 12 percent since January this year.

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Nigerian bond yields to rise, Kenya's to hold steady

Yields on Nigerian bonds are expected to rise next week with investors expected to cut back on their positions before the year-end in order to raise local currency for their obligations.
Nigeria's local debt market has experienced a sell-off in recent weeks on concerns about falling global oil prices and their impact on the local currency, which has lost about 11 percent against the dollar this year.
The central bank devalued the naira by 8 percent in a one-off move last week as it sought to stem a slide in the country's foreign exchange reserves which have been hit by the oil price slump. Investor concern has reduced hard currency inflows into the country's debt and equity markets.
"Liquidity was tight in the week ... and this has triggered some sell-off to raise cash by some investors," one dealer said.
Buying of bonds by local pension funds in the past few weeks has failed to reverse the tide, traders said.
Most offshore investors have been on the sidelines, monitoring the impact of monetary policy measures on the local currency and how the government plans to cope with dwindling revenue from weaker oil prices.
Yields on the benchmark 10-year bond rose to 13.45 percent from 13.30 percent last week, while the 2016 bond was trading at 13.70 percent against 13.40 percent last week. The 2022 bond was trading at 13.72 percent versus 13.14 percent previously.

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Nigeria naira at new record low after cbank sells dollars at its new band

Nigeria's naira hit a new record low against the dollar on Tuesday, sliding further away from the central bank's new target band as demand for the greenback continued unabated, dealers said.
The unit eased to a low of 187.55 naira on the interbank market in volatile trades shortly after the market opened, as dealers scrambled to fill demand orders not met at a central bank auction the previous day.
The central bank sold dollars at its new target mid-band of 168 naira at an auction on Monday and depreciated the currency by 1.78 percent from 165 naira it had auctioned it earlier, dealers said.
It sold around $169 million to commercial lenders at the auction, short of meeting demand for the greenback, dealers said, pushing the excess demand to the interbank market.
It usually sells between $200 million to $300 million at previous auctions.
"The market is reacting to the depreciation of the naira at the auction on Monday and central bank's inability to meet demand," one dealer said, adding that demand was coming mostly from importers.
The bank devalued the currency by 8 percent against the dollar a week ago in a bid to halt a decline in the foreign reserves of Africa's leading energy producer, but has since struggled to keep the currency in its new target range.
The target band since the devaluation is 5 percent plus or minus 168 to the dollar, but doubts remain about whether the devaluation went far enough given the likelihood of continuing low oil prices and the bank's ability to maintain the band will be tested in coming weeks.
The bank has been selling dollars to commercial lenders to try to prop up the currency, but dealers said it has not been sufficient to lift the naira, which is currently trading 5.5 percent below the lower end of the bank's new target band.

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