The Nation Newspaper

Tag: liquidity

  • N361b T-Bills subscription raises market liquidity

    The Treasury Bills (T-bills) has recorded improved performance for the second consecutive week as market liquidity and buying interests  rise, financial market analysts have said.

    The market recorded an allotment of N130 billion against a total subscription of N361 billion, analysts at Afrinvest West Africa said. The 91, 182 and 364-day bills were fully oversubscribed at the last Primary Market Auction.

    Also, stop rates across all tenors declined due to improved system liquidity and higher subscription as the 91, 182 and 364-day rates dropped to 11.85 per cent from 11.95 per cent; 13.50 per cent from  13.65 per cent and 13.50 per cent from 13.70 per cent respectively.

    The Federal Government has also paid off about N130 billion worth of T-Bills which matured last week instead of rolling over the debt as was the previous practice, traders said.

    Director-General of the Debt Management Office (DMO), Patience Oniha, confirmed the payment last Friday and said a treasury auction calendar for March would be released this week. Nigeria issued a $2.5 billion Eurobond last month to help redeem portions of its T-Bills portfolio to lower costs.

    It has been working to lower its costs, particularly as inflation fell for the 12th time in a row in January. Treasury yields have been falling on expectations that the government will sell less debt at its second quarter auction after it sold the Eurobond. Traders expect rates to fall further after the pay off.

    Finance Minister Kemi Adeosun last month said the country would redeem N762.5 billion worth of T-Bills. Nigeria has a T-Bill portfolio of N2.7 trillion ($8.6 billion). It paid off N198 billion worth of bills in December, leading to rates dropping by around 300 basis points.

  • CBN boosts forex market liquidity with $210m

    CBN boosts forex market liquidity with $210m

    The Central Bank of Nigeria (CBN) yesterday injected $210 million into the foreign exchange market  to meet customers’ requests in various segments of the market.

    In its quest to meet customers’ needs in the various segments of the market, the CBN offered $100 million to authorised dealers in the wholesale segment of the market, while the Small and Medium Enterprises (SMEs) segment got the sum of $55 million.

    According to figures obtained from the bank, customers in need of foreign exchange for invisibles such as tuition fees, medical payments and Basic Travel Allowance (BTA), among others, were also allocated the sum of $55 million.

    The bank’s Acting Director, Corporate Communications Department (CCD), Isaac Okorafor, reiterated the bank’s commitment to continuous to intervention in the interbank foreign exchange market, in line with its pledge to sustain liquidity in the market and maintain stability.

    Okorafor said that the CBN would continue to strategically manage the forex with a view to reducing the country’s import bills and halting depletion of its foreign reserves.

    It will be recalled that last Monday, February 12, the CBN had intervened to the tune of $210 million to cater for requests in the various segments of the forex market. Meanwhile, the naira continued its stability in the forex market, exchanging at an average of N360/$1 in the bureau de change segment of yesterday.

  • Forex: CBN boosts liquidity with $195m

    The Central Bank of Nigeria (CBN) yesterday injected $195 million into the Inter-bank Foreign Exchange Market.

    Figures obtained from the bank indicate that the CBN offered $100 million to authorized dealers in the wholesale segment of the market, while the Small and Medium Enterprises (SMEs) segment received the sum of $50 million.

    Those requiring foreign exchange for invisibles such as tuition fees, medical payments and Basic Travel Allowance (BTA), among others, were allocated the sum of $45 million.

    CBN’s Acting Director in charge of Corporate Communications, Isaac Okorafor, confirmed the figures. He said the bank was confident that the level of transparency it had entrenched in the market would help the naira sustain its steady run against the dollar and other major currencies around the world.

  • Liquidity squeeze threatens settlement at equities market

    Liquidity squeeze threatens settlement at equities market

    The inability of investment firms and stockbrokers to access amenable funds is threatening efficient settlement at the Nigerian equities market.

    Also threatening the market is the constriction of the income sources and portfolio of most operators

    Many stockbroking firms and stockbrokers have been found to be carrying out transactions at the market without adequate funding of their accounts, thus exacerbating settlement risks.

    Sources said at the weekend that stockbrokers were facing liquidity squeeze as many of the operators have been consigned to the low-end of trading income in the absence of large activities in the primary market and access to funding windows.

    Nigerian equities have made average gain of more than 30 per cent so far this year, but several portfolios and investment firms remain under the red.  The equities had lost N3.98 trillion in the past three years. The stock market had been on a losing streak since 2014. Investors lost N1.75 trillion in 2014 and followed this with another loss of N1.63 trillion in 2015. Against the general expectation that political transition and new government will quicken a rebound, equities closed 2016 with a net capital loss of N604 billion. Aggregate market value of all quoted equities on the Nigerian Stock Exchange (NSE) closed 2016 at N9.247 trillion as against N13.226 trillion recorded at the start of trading in 2014, representing a net capital loss of N3.98 trillion.

    A report by NSE obtained at the weekend indicated that non-funding of trading and personal dealing accounts by dealing firms and stockbrokers has been undermining the effectiveness of the settlement system at the stock market.

    The report noted that some operators have been carrying out “transactions without adequately funding their accounts thereby exposing the market to settlement risks”.

    Under the extant rules of the NSE, stockbrokers are expected to fund their accounts in time to ensure effective settlement, in line with the T+3 settlement system at the Exchange.

    Under the “Rulebook of The Exchange 2015”, in order to have a valid transaction, unless otherwise stipulated at the time of a transaction all shares dealt in by a dealing member shall be deemed to be fully paid while all transactions entered into by dealing members shall be for net prices as between the buyer and seller. Also, any offer to buy or sell at a price named, shall be funded.

    Besides, compliance manual and code of ethics require all operators to have adequate processes in place to prevent potential conflicts of interest and insider dealing.

    Authorities at the Exchange have already served a notice that it may henceforth take disciplinary actions against operators of unfunded accounts.

    The Council and management of the Exchange are empowered to exercise their disciplinary powers against a dealing member, where such dealing member “is or has been in breach of clearing and settlement rules”.

    “Consequently, all dealing members and concerned employees as appropriate are strongly cautioned to desist from carrying out trades without adequately funding their trading accounts. Please be advised that the Exchange will not hesitate to bring disciplinary action against erring firms and their authorised dealing clerks,” the notice stated.

    Liquidity enhancement and ways of improving access to funding for market operators were some of the highlights of the discussions at the recent capital market stakeholders’ meeting.

    President, Association of Issuing Houses of Nigeria (AIHN), Mr. Sonnie Ayere recently called for a review of the practice rules and scope of operations of stockbroking firms to make them more viable and profitable.

    According to him, the current operational scope of stockbroking firms limits their access to large pool of capital and restricts them from exploring viable business opportunities that can help them to build up substantial capital and profitability.

    He described stockbroking firms as “endangered species” as they face significant challenges in funding their businesses, since they cannot easily access the short-term money markets.

    “They cannot access formal repo markets for liquidity, and this adversely impacts their sales and trading operations. Liabilities are required to fund an institution’s creation of assets but, institutions under Securities and Exchange Commission (SEC) purview have been denied access to the domestic market’s deepest liquidity pool,” Ayere said.

    He pointed out that without a review and expansion of the current operational scope for stockbroking firms, the securities businesses will remain very small with very little if any, impact on the wider economy.

    According to him, while all financial markets have two types of intermediation-bank-based intermediation and market-based intermediation, only bank-based intermediation works efficiently in Nigeria. Market -based intermediation is much less efficient as operators face significant challenges accessing wide sources of funding and thus have very inefficient sales and trading operations or maturity transformation activities.

  • CBN sells N400b T-Bills to mop up liquidity

    CBN sells N400b T-Bills to mop up liquidity

    •Capital importation hits $1.5b

    The Central Bank of Nigeria (CBN) sold N400 billion ($1.27 billion) of Treasury bills at the weekend, lifting the interbank lending rate to 12 per cent.
    The apex bank sold N82 billion in 181-day Treasury bills at 18 per cent and N309 billion at 18.6 per cent, mopping up liquidity from the money market and pushing up the cost of borrowing among lenders. “We have some major placers quoting about 20 per cent for overnight placement, but most takers are not willing to borrow at that rate,” one dealer told Reuters.
    The markets had opened on Thursday with a surplus liquidity of about N467 billion due to an injection of matured Treasury bills until the CBN debited banks for the purchases of N302.4 billion in primary market Treasury bills.
    Traders said the CBN further moved to cut liquidity with the sale of open market operations bills, which brought returns above the inflation rate.
    The CBN raised N302.4 billion at the Wednesday’s Treasury bills auction, more than the N242 billion planned due to strong demand for the one-year debt, while payment for the purchased was debited from commercial lenders’ accounts on Friday.
    The naira traded flat at both the official interbank window and parallel market, with black market traders quoting N498 to the dollar. Commercial lenders quoted the currency at 305.25 a dollar, about the level it has traded since August.
    Meanwhile, data from the National Bureau of Statistics (NBS) showed that Nigerian Capital Importation, which covers fourth quarter of last year was estimated at $1.5 billion, a decline of 15 per cent quarter-on-quarter and 0.5 year-on-year.
    Monthly imports within the quarter were relatively although December recorded marginally the highest level of $555 million.
    Yearly, capital imports fell by 47 per cent from $9.6 billion in 2015 to $5.1 billion. The figure was the lowest since the series’ inception in 2007.

  • Power sector liquidity gap hits N1.1tr

    Power sector liquidity gap hits N1.1tr

    In  two months, the power sector’s liquidity gap has risen from N1trillion to N1.1 trillion, the Association of Nigerian Electricity Distributors (ANED) has said.

    Last November, Eko Electricity Distribution Company (EKEDC) Managing Director, Dr. Oladele Amoda put the liquidity gap at N1 trillion.

    Aned spokesman Sunday Oduntan told The Nation that the liquidity gap went up by N100billion at the beginning of this year.

    The development, he said, suggested a 10 per cent increase in the funding gap in the industry.

    He said the increase followed the operators inability to fund their businesses. Oduntan said the power distribution companies (DisCos) were the “worse hit”  because they contend with huge debts caused by non-payment of bills.

    Oduntan said: ‘’The liquidity gap was around N900billion in the third quarter of 2016, but it is now over N1trillion. The gap occurs because the Ministries, Departments and Agencies (MDAs) owe the DisCos over N600billion. The failure of the MDAs to pay their debts has affected the capacity of the DisCos to create new investments.”

    He said the power firms were not getting support from banks. “The sector is facing problems, such as liquidity squeeze, shortage of gas, poor generation and distribution, and weak metering system. The problems are financial and technical in nature,” he added.

    According to Oduntan, other issues confronting the sector include meter bypassing, stealing and vandalism of cables and other power equipment.

    Gas shortage, he said, is having a debilitating effect on the power sector, adding that there won’t be  “appreciable growth” unless the issue is resolved.

    Oduntan said the DisCos have adopted moral suasion in debt  recovery. He said the firms could not use the Economic and Financial Crimes Commission (EFCC) to recover debts because such approach is not in the country’s best interests.

    Amoda said the DisCos had made some progress despite their limited resources.

    He said the DisCos were having problems meeting the customers need because of  lack of funds.

    The  sector, he said, needed “proper funding” to achieve its goal of improving electricity supply.

    For year after the sector privatisation, there has been no improvement in power supply.

    Last week at the power sector stakeholders’meeting in Lagos, the Minister of Power, Works and Housing, Babatunde Fashola,  said the government with some development agencies were working out how to make funds available for the sector.

  • Skye Bank gets CBN’s loan to boost liquidity

    Skye Bank gets CBN’s loan to boost liquidity

    The Central Bank of Nigeria (CBN) has provided loan to Skye Bank Plc to boost its liquidity after the lender breached requirements on capital and lending.

    The short-term lending facility will allow the new management to “ensure that some withdrawals it suffered in the wake of the undue panic of last week do not adversely affect its operations,’’ Isaac Okorafor, a spokesman for the CBN told Bloomberg.

    The regulator has also issued guarantees to the bank’s depositors and creditors as a demonstration of its health, he said.

    The CBN replaced top managers of the lender earlier this month after it breached required thresholds for liquidity and non-performing loans. While the regulator moved to calm markets, assuring that the bank and indeed, the industry remained healthy, its stock plunged to record lows, leading to declines among other lenders.

    Skye Bank’s shares, however, rose for the fourth straight day yesterday, gaining nine per cent to 85 kobo in Lagos trading, the best performance on the 171-member Nigerian Stock Exchange All-Share Index. Almost 53 million shares were traded, more than three times the three-month average. It has declined by 46 per cent this year, compared with a 1.8 per cent retreat by the Nigerian All Share Index. The CBN said it has no plan to sell Skye Bank.

    In an earlier statement, the new management at Skye Bank said the lender’s fundamentals remained strong and virile, assuring customers and other stakeholders of the safety of their funds and investments.

    Its Group Managing Director/CEO, Tokunbo Abiru, said his team would leverage on the bank’s reputable information technology platform to make it not just a frontline retail and commercial bank, but also an industry leader.

    Abiru, who outlined his vision for the lender, said his team would harness the expertise and skill sets of the bank’s employees and the reconstituted board to take the bank to new heights.

    He noted that as a Systematically Important Bank (SIB), Skye Bank occupies a sensitive role in the financial life of Nigerians and the entire West African sub-region.

  • Liquidity rises over N120b bond cash

    Liquidity rises over N120b bond cash

    •Emefiele lures US, UK investor

    The interbank overnight lending rate rose for the second consecutive week last Friday to an average of 15 per cent from 10 per cent a week ago, as banks scrambled for liquidity to settle bond purchases.

    The Debt Management Office (DMO) sold N120 billion worth of local currency-denominated bonds with mixed yields compared with the returns from previous issues last month while payment for the debt sale was due on Friday.

    Total banking system liquidity opened at N137.30 billion, but payment for bonds significantly reduced the level of cash in the market, leading to a sharp rise in the cost of borrowing among commercial lenders.

    Traders told Reuters some banks actually quoted as high as 50 per cent for overnight placement in early trade in their quest to get cash to pay for their bond purchases. But demand for cash dropped after the central bank refunded about 40 billion naira in cash reserve ratio to some banks.

    “We see the market trading around this level next week because of anticipation that some banks would prefer to go to the discount window to borrow at a cheaper rate of 14 percent,” one dealer said.

    Meanwhile, the Central Bank of Nigeria (CBN) Governor, Godwin Emefiele flew to Britain and the United States last week to try to lure back investors scared off by the plunge in oil prices and resulting financial turmoil, a central bank official told Reuters.

    The CBN last month bowed to foreign pressure to remove the 16-month-old 197-per-dollar peg on the naira it had brought in to try and control its fall as crude prices plummeted.

    Investors welcomed the move but many said they were still steering clear until the economy shows signs of concrete recovery. Trade has been thin and dollar liquidity tight, leaving the CBN as the main supplier of hard currency.

    Emefiele and his deputy Dr Sarah Alade held meetings with investors in Britain and the United States, the central bank official said. “It was more like a road-show to get investors back into the country,” and authorities were particularly keen to boost dollar liquidity, he added.

    The naira tumbled to a record low of 295.25 in thin trades against the dollar on Friday after the central sold dollars to try and boost liquidity on the interbank market, traders said. It was quoted at 365 on the black market on Friday

  • CBN pegs liquidity ratio for commercial banks at 30%

    CBN pegs liquidity ratio for commercial banks at 30%

    The Central Bank of Nigeria (CBN) has said commercial banks will need to maintain minimum liquidity ratio of 30 per cent in line with regulatory requirement. The new guideline is contained in te Monetary, Credit, Foreign Trade and Exchange Policy for fiscal years 2016/2017 released by the apex bank.

    Liquidity ratios are a class of financial metrics used to determine a bank’s ability to pay off its short-term debts obligations. It is the total specified liquid assets of a bank divided by total current liabilities. The higher the value of the ratio, the larger the margin of safety a bank possesses to cover short-term debts.

    The apex bank however said merchant and non-interest banks shall continue to maintain a minimum Liquidity Ratio (LR) of 20 and 10 per cent, respectively, subject to review from time to time.

    According to the guidelines, discount houses shall continue to invest at least 60 per cent of their total liabilities in government securities in the 2016/2017 fiscal period, while the ratio of individual bank loans to deposits, is retained at 80 per cent.

    It said the major tool for liquidity management will continue to be Open Market Operation (OMO) Auctions will be conducted through the sale and purchase of Treasury Bills and CBN Bills at the two-way quote trading platform.

    The Bills’ tenor and volume, it said, would be influenced by the liquidity conditions in the banking system. “All authorized Money Market Dealers (MMDs) which include commercial and merchant banks, non-interest financial institutions and discount houses shall continue to be the participants at the OMO. In addition, OMO auctions will be complemented by repurchase agreements (repo/reverse repo) at appropriate rates based on existing Monetary Policy Rate,” it said.

    It said cash reserve and liquidity ratios shall continue to serve as prudential and liquidity management tools.

    “The Net Open Position (NOP) limit (long or short) of 20 per cent of shareholders’ funds unimpaired by losses, effective from January 2014, shall continue to apply during the programme period. Accordingly, all banks are to ensure that the difference between the overall foreign currency assets and liabilities (on and off balance sheet) shall be within the prescribed limit,” it said.

    “Furthermore, the requirement that aggregate foreign currency borrowing of a bank excluding inter group and interbank (Nigerian banks) borrowing should not exceed 75 per cent of its shareholders’ funds unimpaired by losses shall be retained”.

  • UBS ends coverage of five-bank Eurobonds on liquidity

    UBS ceased its fixed-income research coverage of Nigeria’s banks, according to a person with knowledge of the matter, as international investors increasingly shun Africa’s biggest oil producer and economy.

    The lender cut its coverage of five banks, including Guaranty Trust Bank and Zenith Bank, Nigeria’s two biggest lenders by market value, citing a lack of liquidity in their Eurobonds, said the person, who asked not to be identified because it hasn’t been made public. Access Bank, Diamond Bank and FBN Holdings, owner of First Bank of Nigeria, were the other lenders affected, said the person.

    JPMorgan removed Nigeria from its local-currency emerging-market bond indexes, tracked by more than $200 billion of funds, in September, because of central bank curbs on currency trading that made it difficult for foreign investors to buy and sell naira debt. Barclays followed suit about two months later with its equivalent bond index.

    Those trading restrictions, which the central bank has had in place for almost a year to support the naira’s peg of roughly 197-199 to the dollar, may also cause Nigeria to be removed from the MSCI Frontier Markets Index of stocks, Charles Robertson, the chief economist at Renaissance Capital, said in a note to clients Feb. 10. Nigeria has the second-biggest weighting in the gauge after Kuwait.

    Nigeria, which derives most government revenue and almost all export earnings from oil, has been battered by the slump in crude prices to 12-year lows. Economic growth slowed to 3 percent last year, the least since 1999, according to the IMF. — Paul Wallace, Bloomberg New.