Naira stabilises across markets as CBN eases CRR to 25%

nairaThe naira on Tuesday closed stable against the dollar across all segment the foreign exchange, as the Central Bank of Nigeria (CBN) cut the Cash Reserve Requirement (CRR), which is the minimum fraction of the total deposits of customers that banks have to hold as reserves either in cash or as deposits with the CBN, to 25 percent from 31 percent.

BusinessDay investigation revealed that the naira closed at N220/$ and N222/$ at the Bureau de Change (BDC) segment of the foreign exchange and parallel market, respectively, the same as the previous day.

Also at the interbank foreign exchange, the local currency maintained stability as it closed at N199.05 against the dollar.

Against other currencies, naira closed stable as it traded at 248 and 250 Euro at the BDC and parallel market, 338 and 340 pounds at both segment of the forex market.

However, the CBN is scheduled to hold a Treasury Bills (T-Bills) Primary Auction today as T-Bills worth N100.88 billion will mature, while an equal amount will be issued in 91-day, 182-day and 364-day instruments. The CBN is expected to auction N31.19 billion, N10.61 billion, and N59.08 billion in the 91-day, 182-day and 364-day instruments, respectively.

Following the sell-off witnessed on Treasury bills immediately after the announcement regarding the impending phase out of Nigeria’s bonds from the JP Morgan GBI-EM, there has been a rally on these instruments, with the average rate falling by 1.42 percent over the four trading days since the last auction.

Analysts at Meristem Securities limited ascribe this trend majorly to the high liquidity levels in the system, due to the lack of OMO sales over the last six proposed operations. While, the lack of a full allotment at the last few bonds and bills auctions have pushed activities to the secondary market.

“We anticipate that the level of stop rates proposed for this auction will be largely influenced by the outcome of the MPC meeting. Given that the Cash Reserve Ratio (CRR) has been revised to 25 percent, we expect a further increase system liquidity, which should result in a more marked oversubscription than was witnessed at the last few auctions, which we anticipate will pressure rates downwards”, the analysts said.

They anticipate a buoyant level of participation on the respective instruments on offer at this auction, with the possibility of oversubscriptions on both, based on aforementioned reasons. Consequently, the analysts advise rates with the dual purpose of achieving the best possible yields as well as ensuring the success of the bid.

Source : BusinessDay

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