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Treasury Newsletter – April 23, 2021

External Reserves Trot Higher on Stronger Crude Prices. CBN to Sanction Banks, BDCs for Rejecting Old, Smaller Denomination of US Dollars...

External Reserves Trot Higher on Stronger Crude Prices

Following two consecutive months of decline in gross external reserves (down 3.3% or $1.2bn m/m in Feb-2021 and down 0.8% or $279.4m in Mar-2021), gross reserves appear to be trotting higher in April, climbing 1.1% MTD or $398.4m. Year-to-Date, gross external reserves remain down by 0.4% or $155.1m.

CBN to Sanction Banks, BDCs for Rejecting Old, Smaller Denomination of US Dollars

Following numerous complaints from members of the public on the rejection of old/lower denominations of the dollar by banks and other authorised forex dealers, the Central Bank of Nigeria (CBN) has ordered Deposit Money Banks (DMBs) and Bureau De Change (BDC) operators to, henceforth, accept from their customers’ old and lower denomination of US dollars as legal tender or face sanctions.

Treasury Bills

It was another consecutive session with muted trading activity in treasury bills space, as pressures on system liquidity continue to pressure the positions of banks. Offers remained steady across the treasury bills curve, but with no demand as local banks continued to focus on their liquidity issues.

FGN Bonds

The FGN Bond market opened the week on a quiet note, as investors showed little or no interest in the secondary market given that the monthly FGN bond auction approaches. However, trading in the FGN market on Wednesday was more active than expected, despite the monthly primary auction looming in the background. We saw improved demand at the belly and tail-ends of the bond curves, as speculators looked to pre-empt the auction rates.

Money Market

Interest rates trended northwards by about c.113bps on the average on Wednesday as naira dealers scrambled to cover their positions as the market opened in deeper negative territory (c. N123.59Bn opening). Local banks camped at the CBN Lending and Repo windows for liquidity injection, increasing borrowing amounts by 69.89% D/D to c. N257Bn.

 

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