At the end of the three-day public holiday declared by the Federal Government last week, Nigeria’s economy inched closer to recession as the nation had lost N138 billion by the time activities resumed on Friday.
This was because there were scheduled treasury bills auction estimated at N94 billion, as well as N44 billion treasury bills maturity for the week, which the unusual straight three-day had put off.
The monetary policy measures were expected put liquidity into the system in the week, with the auction component helping to taper its effect on money market rates.
The treasury bills auctions and maturities are usually executed between Tuesdays and Thursdays, save for seeming special interventions on Fridays.
In the event the monetary policy measures are implemented today, the effect in the market rates would be minimal and driven by sentiments because the liquidity will not have trickled down to the market and volumes of interbank activities are usually moderate.
“So, the week just ran like a closed economy. It is as if everyone was just sleeping and not waking up at all. That is exactly how gains and losses and value addition to the economy also remained standstill. Friday’s transactions are usually cautious one due to speculations over the week ahead. The auctions on Friday will not make much meaning,” a financial market operator told the press.
The previous week, the treasury bills market saw renewed buying interest with the launch of the Naira-settled Over-The-Counter market, as the average rate declined on all the trading days of the week.
A decline in the rate of treasury bills shows confidence and an indication that traders are pricing the security with lesser risks attached, as well as the quantity of money in the market.
Average rate inched lower on Tuesday to 10.2 per cent as system liquidity improved owing to inflow of Federal Accounts Allocation Committee disbursement, from 10.7 per cent on Monday last week.
The sentiment continued till Friday, when average bills’ rate closed at 9.4 per cent, down 1.7 per cent week-on-week on the back of N115 billion Open Market Operations maturity inflow into the system by Thursday.
Similarly, the interbank lending rate, particularly the Overnight, fell to five per cent on Friday, compared with 15 percent a week earlier, as cash from maturing treasury bills and payments by government to its contractors, boosted liquidity.
According to Reuters, the increased cash flow left the money market with a N267.10 billion surplus balance on Friday last week, reversing the N300 billion shortfall a week earlier and pushing down the cost of borrowing among commercial lenders.
Many banks had approached the central bank’s discount window to borrow short-term cash last week to enable them meet obligations and ease liquidity pressures, traders said.
Traders said the expected release of capital spending by the federal government to re-inflate the economy should inject more cash into the money market in the coming days, which should impact positively on the interbank rate.
