Nigeria's money market round-up

During the week, the interbank money market tightened with overnight rates hitting 23 percent levels midweek.

However, OMO maturities and coupon payments eased liquidity later in the week. Overnight rates closed at 11.25 percent on Thursday and expected to trade at the same level on Friday.

The fourth quarter T-bill issuance calendar was released during the week, showing a nil net cash flow as maturing T-bills are just expected to be rolled over. 

However, the absence of 364-day tenor offerings at the OMO auctions continued to push a rally at that part of the curve despite tightening liquidity. The 30, 90, 180 and 364-day treasury bills opened in the secondary market at 16.00 percent, 17.25 percent, 17.45 percent, and 17.60 percent respectively, and closed at 13.10 percent, 17.68 percent, 17.88 percent, and 17.45 percent. 

The DMO offered its initial 100 billion naira in 7-year Ijarah sukuk bonds with a rental rate of 16.47 percent with the bidding expected to last for a week. 

The monthly FGN bond auction has been postponed till 27 Sep 2017. Bond yields also dropped due to investor demand in the secondary market. The 2020, 2021, 2022, 2027, 2036 and 2037 maturity bonds opened in the secondary market at 16.82 percent, 16.60 percent, 16.47 percent, 16.65 percent, 16.55 percent, and 16.62 percent respectively, and closed at 16.28 percent, 16.39 percent, 16.28 percent, 16.45 percent, 16.28 percent, and 16.37 percent.

The success or otherwise of the Sukuk offering next week would be of particular interest and could impact expectations of supply at the bond auction coming up in a fortnight.

However, there is likely to be enough investor interest to sustain the bond rally in the secondary market given the increasing confidence in the stability of the exchange rate at the I&E window. In the Investors and exporters' window, the naira traded in a narrow range of 359 and 361 and the average daily turnover for the week has been $130 million. The CBN sold $100 million at this week’s wholesale Special Secondary Market Intervention Sales (SMIS) auction.

(C) Citibank Nigeria