Nigeria: CBN Injects $8.287bn in Forex Market in Six Months

The Central Bank of Nigeria (CBN) injected a total of $8.287 billion in the interbank foreign exchange (forex) market in the first six months of 2019.

The central bank, which disclosed this in its ‘Half Year Activity Report,’ as at June 2019, posted on its website, pointed out the intervention was to manage demand pressure and ensure exchange rate stability.

The intervention comprised $2.143 billion at the interbank spot; $550.7 million for invisibles; $810 million for SMEs; $212.11 million at the Investors and Exporters’ (I&E) window and $4.572 billion as Forwards sales. On the other hand, the Bank purchased $9.369 billion at the interbank segment, hence a net purchase of $1.081 billion.

The report showed that the forex market remained stable in the first half of 2019. This was attributed to the sustenance of policy measures adopted since June 2016.

The CBN listed some of the measure to include moral suasion, restriction of items from the official foreign exchange window, operations at the autonomous I&E window, and increased volume and frequency of foreign exchange sales to BDCs.

Furthermore, the report showed that at the Forwards segment, the sum of $4.979 billion matured, while $2.552 billion was outstanding as at the end of June 2019.

In the corresponding period of 2018, $9.500 billion was sold at the Inter-bank segment, comprising $1.546 billion at the interbank spot; $768.70 million for invisibles; $637 million for SMEs; $1.237 billion at the I & E window and $5.311.09 billion as Forwards sales.

According to the report, the CBN Bills offered at the open market amounted to N11.895 trillion, while total subscription and sales amounted to N13.098 trillion and N11.871 trillion in the first half of 2019, respectively, compared with N13.973 trillion, N11.651 trillion and N9.744 trillion offered, subscribed to and sold respectively, in the corresponding period of 2018.

It explained that the high level of activity arose from the monthly disbursements to the three tiers of government by the Federation Account Allocation Committee (FAAC) and maturing CBN Bills during the period.

Thus, the cost of liquidity management in the review period rose to N1.297 trillion, compared to N848.32 billion in the corresponding period of the previous year.

“In the review period, the tenors of open market operations (OMO) auction ranged from 27 to 364 days, at stop rates ranging from 11.0500 to 15.0000 per cent compared to tenors of 73 to 365 days at stop rates of 10.9000 to 14.4000 per cent in the previous year.

In addition, the half year report put the total value of repo transactions in the period at N611.30 billion, with interest rates ranging from 18.50 to 19.50 per cent from January to March 25, 2019 and 18 to 19 per cent from March 26 to June 2019, following the downward review of Monetary Policy Rate. The tenors were for 4- to 90-days and the total interest earned amounted to N19.25 billion.

“In the first half of 2018, the total value of repo was N240.73 billion, while interest earned was N6.53 billion at 18.50 to 19.50 per cent for the same tenors.

The increased level of request in the review period was due to preference for tenored funds instead of overnight facility.

“CBN standing facilities were available at the discount window for banks to meet up with their liquidity obligations by either borrowing from the standing lending facilities (SLF) or depositing excess funds at the standing deposit facilities (SDF) windows at the end of each business day.

“The trend in 2019 showed more recourse to the SLF in the first half, when compared with the corresponding period of 2018.

“The remunerable limit for daily deposits per institution at the SDF remained at N7.50 billion. The applicable rates, which were anchored to the MPR, for the SLF and SDF, also remained 16 and nine per cent, from January to March 25, 2019, respectively; and 15.50 and 8.50 per cent from March 26 to June 2019,” it stated.

According to the central bank, in the review period, the average daily volume of SLF was N95.63 billion in 121 transaction days, of which Intraday Liquidity Facility (ILF) conversion constituted N35.50 billion or 37.12 per cent of the total request.

As a result, the average daily interest income amounted to N66.87 million. In the first half of 2018, the average daily volume of SLF was N57.36 billion in 123 transaction days, of which ILF conversion constituted N45.54 billion or 79.39 per cent of the total request. Consequently, the average daily interest income was N44.40 million.

“The higher patronage at the window in 2019 reflected the impact of the prevailing liquidity conditions in the banking system.

“Patronage at the SDF window reflected an average daily amount of N67.64 billion for the 121 business days in the first half of 2019, representing a decrease from N88.30 billion for the 121 transaction days out of 123 business days in the corresponding period of 2018,” the report added.

Source

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Author: skvaller

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