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Overnight Lending Rate Falls on Cash Injection

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1000 naira bills (Nigerian currency)
  • Overnight Lending Rate Falls on Cash Injection

The overnight tenor of the Nigerian Interbank Offered Rate (NIBOR) fell to 14 per cent on Friday from 22 per cent the preceding week after the central bank repaid matured treasury bills, injecting cash into the banking system, traders said.

Traders said the bank injected around N140 billion through its pay-out of matured open market operations bills, which helps lower borrowing costs among banks.

The cash helped money-market liquidity, trader despite bond and treasury bill during the week. The debt office raised N39 billion with local currency bonds and N120 billion in short-dated treasury bills last week.

The overnight lending rate had risen earlier last week to peak at 30 percent last Wednesday due to tight liquidity, Reuters revealed. It fell on Thursday following cash injections from matured treasury bills. Traders expect borrowing costs to rise slightly next week as liquidity drains away.

According to Afrinvest West Africa Limited, the Central Bank of Nigeria (CBN) rolled over maturing Treasury Bills mid-week at slightly higher rates. However, two open market operations (OMO) maturities last Thursday, worth N140 billion eased liquidity shortage in the system to offset the treasury bills and bond auctions debits.

The Afrinvest report further showed that sentiment in the treasury bills market was largely bullish as rates closed the week lower on three out of five sessions.

At the start of the week, average treasury bills rate opened 18 basis points (bps) higher but sentiment was bullish on subsequent sessions, save for Wednesday, as investors continue to pile into short term debt securities.

But the outcome of the monetary policy committee meeting holding this week will influence market pricing of treasury bills. Barring any OMO auction, money market rates are expected to hover around current levels.

FOREX Market

The naira/dollar exchange rate was largely stable at all segments of the FX market during the week. Earlier in the week, the FMDQ OTC exchange announced the suspension of the FMDQ interbank spot rate, replacing it with the CBN spot rate until the general market structure becomes more credible and transparent. Consequently, the FMDQ published the last executed trades (usually CBN interventions) as the CBN spot rates during the week.

Expectedly, the CBN spot rate was stable on all trading days of the week, closing at N305.25/$ on Monday, before depreciating marginally to N305.50/$ towards the end of the week.

“Our expectations of further fragmentation of the FX market and a liquidity constraint at the parallel market materialised as black market operators refused to sell dollars at the regulatory mandated rate of N400.00/$1 but willing to buy at N395/$1, most likely to hoard. However, naira/dollar rate at the underground parallel market for operators willing to defy regulatory directives on rate traded between N455.00/$ and N465/$ during the week without liquidity constraints.

“In the futures market, total value of open contracts stood at $3.8billion as at Friday 18th November. We observed that investors are subscribing more to the longer dated Naira settled OTC futures contracts which are attractively priced. We expect the CBN to fulfil its obligation on the maturing NGUS NOV 23 2016 futures contract and also replace it with a NOV 2017 instrument in line with recent trend.

“In the interim, we expect that developments in the FX market will be at the vanguard of discussions at the MPC meeting. We opine that the issues in the market will continue to intensify peradventure status quo remains on the management process of the FX market,” Afrinvest analysts stated.

Bond Market Review and Outlook

Sentiment remained bearish in the local bond market last week as average yield across benchmark bonds trended higher on all sessions. As with recent trend, investors continued to show preference for dealing at the shorter end of the yield curve (NTB and OMO), culminating in under-subscription of instruments offered at this month’s bond auction. The week opened on a bearish note and sentiment remained negative till the close of the week. Thus, average yield across benchmarks closed the week at 15.9 per cent, up 65bps week-on-week.

The bearish sentiment was attributed to high inflation levels and investors’ preference for short term debt securities which witnessed increased participation as the primary market NTB issuance conducted midweek was oversubscribed. On Wednesday, the DMO offered N35 billion, N25 billion and N35 billion of the JUL 2021, JAN 2026 and MAR 2036 instruments. However, only the N5 billion, N14 billio and N20 billion were allotted at marginal rates of 15.5%, 16.0% and 15.9% as subscription rate fell to 0.5x, 0.7x and 0.8x for the three instruments on offer respectively.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Finance

Tanzania: African Development Fund Approves $116 Million Loan to Upgrade Southern Road Corridor

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Afdb - Investors King

The Board of Directors of the African Development Fund on Wednesday approved a loan of around $116 million to the Tanzanian government to upgrade a 160-km Mnivata-Newala-Masasi road corridor in the southern part of the country.

The Bank’s loan represents 98.71% of the project cost; the government of Tanzania will provide the remaining 1.29% in funding.

The project will upgrade the roadway, including the 84-meter Mwiti bridge, to bituminous standard. The works also have social components, including the provision of potable water, education and medical infrastructure, the establishment of cashew nut processing units, and extension of entrepreneurial training to women and youth.

The upgrade is expected to open up rural areas in the region and enhance the Mtwara Development Corridor, which links Mtwara Port and Mbamba Bay port on Lake Nyasa. Exporters, importers, small-scale cross-border traders, farmers, transporters are all expected to benefit.

“The periodic isolation of such a significant population worsens vulnerability and undermines social inclusion. Improved road connectivity would therefore build the resilience of the people and widen livelihood opportunities within the Mtwara Development Corridor and the surrounding districts,” Bank Director General for East Africa Nnenna Nwabufo said.

Overall, the five-year project will improve mobility and accessibility for about 1.1 million people in Mtwara, Tandahimba, Newala and Masasi districts and facilitate integration with neighbouring Mozambique, Malawi and Zambia.

Currently, the districts of Tandahimba and Newala, with an estimated combined population of 509,000 people, are mostly cut off, while connection with the Mtwara port area for essential supplies is severely constrained during rainy seasons due to the state of the road.

The project will advance Tanzania’s current five-year Development Plan (2021-2026) and aligns with the Bank Group’s Country Strategy Paper (2021-2025) which emphasizes sustainable infrastructure for a competitive economy and an improved private sector business environment for job creation, as well as two High-5 strategic priorities: Integrate Africa and Improve the quality of life for the people of Africa.

At 30 June 2021, the Bank Group’s active portfolio in Tanzania comprised 22 operations (19 public and 3 private) with a total commitment of about $2.4 billion.

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Banking Sector

FirstBank Expands Its International Money Transfer Network, Reinforces its Commitment to Customer Service

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FirstBank Headquarter - Investors King

In furtherance of the need to expand diaspora remittance inflow into the country, First Bank of Nigeria Limited has increased its network of International Money Transfer Operators (IMTOs), targeted at easing the accessibility of its customers to receive money from close to 100 countries across the world in a safe and secured manner. With over 750 branches across the country, customers can receive money from the nearest FirstBank branch closest to them.

Over the years, FirstBank has been in partnership with Western UnionMoneyGram, Ria, Transfast, and WorldRemit. The bank is also in partnership with other IMTOs which include Wari, Smallworld, Sendwave, Flutherwave, Funtech, Thunes and Venture Garden Group to promote remittance inflow into the country, thereby putting Nigerians and residents at an advantage in receiving money from their families, friends and loved ones across the world.

Beneficiaries can receive remittance in US dollars in any of our over 750 branches spread across the country. Customers without an existing domiciliary account can have dollar account automatically created for their remittances. You can also receive inflow directly into your account through Western Union.

In addition, FirstBank has launched its wholly owned remittance platform named First Global Transfer product to promote the international transfer of funds across its subsidiaries in sub-Saharan Africa. These subsidiaries include FBNBank DRC, FBNBank Ghana, FBNBank Gambia, FBNBank Guinea, FBNBank Sierra-Leone, FBNBank Senegal.

Reiterating the Bank’s resolve in promoting diaspora remittances, regardless of where one is across the globe, the Deputy Managing Director, Mr Gbenga Shobo said “at FirstBank, expanding our network of International Money Transfer Operators is in recognition of the significant roles diaspora remittances play in driving economic growth such as helping recipients meet basic needs, fund cash and non-cash investments, finance education, foster new businesses and debt servicing.

We are excited about these partnerships, as it is essential to ensure our customers are at an advantage to receive money from their loved ones and business associates, anywhere they are, across the world.”

FirstBank pioneered international funds transfer and remittances over 25 years ago and has been at the forefront of promoting cross border payments in the country, having started the journey with Western Union Money Transfer. The Bank’s wealth of experience and operation in over 750 locations nationwide gives it the edge in the market.

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Finance

Private Sector Seeks FG’s Directive on VAT Payment

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Value added tax - Investors King

The Organised Private Sector of Nigeria (OPSN) on Sunday in Lagos called on the Federal Government to urgently make a pronouncement on the ongoing controversy over VAT payment so that businesses will know what to do.

OPSN chairman, Mr Taiwo Adeniyi, made the call at a news conference and said delays in addressing the issue could cause negative effects on businesses, most especially in the collection and remittances of VAT.

“We are aware that by Sept. 21 we get penalised if we do not pay or remit the VAT for the month of August.

“We are also aware that laws are not made in retrospect. It then means that even if those laws have been enacted, particularly the Lagos State law which came into effect in September, it will not affect the payment by businesses in the state.

“Due to our remittances, we have issues with the fact that the law for Rivers was made in August and the majority of the businesses in Lagos usually will have a relationship with the Rivers State Inland Revenue too.

“The confusion in the public space is the reason we are calling on the government to come to our aid as we want to pay.

“It is for the government at the center to make a pronouncement as to what becomes of us,’’ he said.

Adeniyi, who is also the President of, Nigeria’s Employers Consultative Association (NECA), said that the ongoing challenge had the potential to make businesses pay double VAT in view of demands by the FIRS and state governments.

He said that businesses, as the collecting agents, were practically unclear on the authority to remit to and without a clear path, this would further aggravate the pain on businesses.

“It is a popular saying that where two elephants fight, it is the grass that suffers.

“It is no longer news that Nigerian businesses have been battling with myriads of challenges, making the survival of enterprises and ease of doing business in the country among the worst in this part of the world,’’ he said.

There has been controversy over the collection of VAT after a Federal High Court ruled that it was not the duty of the Federal Government to collect the tax.

VAT is normally collected by the Federal Government since the military era and the money is shared by the three tiers of government.

Following the court ruling, however, Lagos and Rivers states passed laws that allowed them to collect VAT.

FIRS, which used to collect the VAT on behalf of the Federal Government, has challenged the court ruling at the appellate court.

OPSN comprises the Manufacturers Association of Nigeria, the Nigeria Association of Chambers of Commerce, Industry, Mines and Agriculture, NECA, Nigeria Association of Small Scale Industries and the Nigeria Association of Small and Medium Enterprises.

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