ZOCK CAPITAL AND INVESTMENT MARKET UPDATE AS AT 10th AUGUST 2021
FOREIGN EXCHANGE MARKET
The I&E FX market, Naira remained unchanged at ₦411.50. Most participants maintained bids between ₦400.00 and ₦412.90 per dollar.
The naira held steady against the dollar at the parallel market on Monday at N509.
The naira held steady against the greenback at the parallel market from the 509/$1 at which it closed on Friday.On the Investors and Exporters’ window, it opened at 411.39/$1. It had a high of 412.90/$1 and a low of 400/$1. The naira closed at 411.50 against the dollar on Monday.Dollar supply continues to increase, forex turnover for the day was $166.06m, according to the FMDQ Group.The naira fell to 525 against the dollar at the parallel market after the Central Bank of Nigeria stopped the supply of foreign exchange to Bureau de Change. Since then, however, it had continued to appreciate.The CBN Governor, Mr Godwin Emefiele, had at the end of the last Monetary Policy Committee meeting announced the stoppage of forex sale to the BDCs, saying they had turned themselves into agents that facilitate graft and corrupt activities of people who seek illicit fund flow and money laundering.
He added that the CBN would channel a significant portion of its weekly allocation currently meant for BDCs to commercial banks to meet legitimate forex demand for ordinary Nigerians and businesses.The CBN had also asked banks to set up dedicated forex teller points for customers. Commercial banks have since started to implement this.
FIXED INCOME SECURITIES AND MONEY MARKET UPDATE
SECONDARY MARKET
There treasury Bills secondary market was relatively quiet across some maturities. The 25-Nov-21 maturity bill recorded the highest dip in yield of 5 bps. The average yield across the curve decreasing by 1 basis point to close at 5.56 percent from 5.57 percent on the previous day. Average yields across medium-term and long-term maturities fell by 3 bps and 1 basis point, respectively. However, the average yield across the short-term maturities closed flat at 3.18 %.
Investment in treasury bills
On August 11th 2021, the CBN is scheduled to hold its scheduled Primary Market Auction to roll over treasury bills maturities worth ₦51.50 billion across 91 day (₦8.44 billion), 182 day (₦16.06 billion), and 364 day (₦27.00 billion) tenors.
Outlook on Treasury bills Primary market auction Yields.
We expect to see some moderation for 364 day bills riding on the back of due investor preference for the instrument .We also expect to see some pressure on debt service charge arising from the need to finance the deficit in the NGN982.84bn supplementary budget approved by the National Assembly .
At the last PMA, average stop rate remained unchanged at 2.5% for 91 and 3.5% for 182 from the last auction driven while 364 days declined to 8.20% from 8.67% . The direction of rates continues to be influenced by strong investor subscription (particularly on the 364-day instrument), and the need to minimise the Federal Government cost of borrowing .
OMO BILLS
For the OMO bills market, the average yield across the curve decreased by 4 bps to close at 7.64 percent as against the last close of 7.68 percent. Buying interest was seen across the long-term maturities with the average yield falling by 17 bps. However, the average yields across short-term and medium-term remained unchanged at 7.31 percent and 7.58 percent.Buying interest was seen in the 15-Feb-22 maturity bill with a yield decrease of 103 bps, while yields on 23 bills remained unchanged.
MONEY MARKET
The Overnight rate decreased by 0.25 % to close at 13.50 % as against the last close of 13.75 %., while the Open Buy Back rate remained unchanged at 13.00 %.
Despite OMO repayment of ₦78.71 billion, the money market rates are likely to trend in double digits.
The DMO released its FGN Bonds offer circular for August 2021 Primary Market Auction, indicating plans to offer FGN bond worth ₦150 billion through re-opening of 10-year (₦50 billion), 20-year (50 billion), and 30-year (₦50 billion) tenors. The bond auction is scheduled on August 18, with settlement on August 20, 2021.
FGN bonds secondary market was bearish with the average bond yield across the curve cleared higher by 2 bps to close at 9.00 % from 8.98 % on the previous day. The 24-JUL-2045 maturity bond was the most active with a decline in yield of 48 bps, while the 27-APR-2023 maturity bond Laggard with an increase in yield of 20 bps. Average yield across the short tenor of the curve expanded by 5 bps. However, the average yields across medium tenor and long tenor of the curve decreased by 2 bps and 15 bps, respectively.
MARKET NEWS HEADLINES
Naira WILL Appreciate To 490/$1 At Parallel Market
The The naira will appreciated in the parallel market towards 490-495 against the dollar in August/September after hitting a record low following the stoppage of foreign exchange supply to Bureaux de Change, the Managing Director of Financial Derivatives Company Limited, Mr Bismarck Rewane, has said.Rewane said this at this month’s edition of the LBS Breakfast Session in his presentation, a copy of which was obtained by our correspondent on Monday.The naira had plunged to 525/$ at the parallel market on July 29, a day after the Central Bank of Nigeria stopped forex sales to BDCs. It closed at 510/$ on Monday.The financial expert noted that the International Monetary Fund last month approved $650bn of special drawing rights for member countries, adding that Nigeria would receive $3.35bn to support external reserves build up.
FG Targeting 50 Billion-Barrel Oil Reserves
The The target of the Federal Government is to increase Nigeria’s oil reserves from 36.91 billion barrels to 50 billion barrels in the short to medium term, the Department of Petroleum Resources announced on Monday.Director/Chief Executive, DPR, Sarki Auwalu, announced this during a workshop with industry partners on Monday.He also announced that the regulator would inaugurate annual awards for companies, projects or individuals who add value to the Nigerian oil sector through enhanced recovery of the country’s oil and gas resources.Auwalu in a statement issued by the Head of Public Affairs, DPR, Paul OSU, said the Improved Oil Recovery/Enhanced Oil Recovery Awards were part of deliberate engagements with industry partners to achieve maximum economic recovery strategies for Nigeria.
Why Forex Supply To BDCs Cannot Be Sustained Now
Some of the main aims for the sales of forex to operators of licenced Bureau de Change outlets was to ease pressure on supply and firm up the naira; but that has been defeated, MARK ITSIBOR reports. From Spain to China, London to South Africa, the ideal practice is that Bureau de Change (BDCs) are supposed to be formal institutions licenced by the central bank, with licencing guidelines, defining their mandate. In Nigeria, it is supposed to be the retail end of the market to moderate prices at that level because of the shocks the country constantly sees. That segment of the market was initially regarded as very little, insignificant; “so we feel it is not going to really impact on the other parameters of exchange rate,” director, monetary policy department of the Central Bank of Nigeria (CBN) Dr Hassan Mahmud .
Brent Crude Price Slides To $68.86/Barrel
Oil prices fell about three per cent yesterday, extending last week’s steep losses on the back of a rising United States’ dollar and concerns that new coronavirus-related restrictions in Asia, especially China, could slow a global recovery in fuel demand.A United Nations panel’s dire warning on climate change added to the gloomy mood after fires in Greece have razed homes and forests and parts of Europe suffered deadly floods last month.Brent futures fell $1.84, or 2.6 per cent, to $68.86 a barrel, while U.S. West Texas Intermediate crude fell $1.88, or 2.8per cent, to $66.40 .That put both benchmarks down about 10per cent over the past 10 sessions. WTI traded at its lowest intraday since May and was on track for its lowest close since May 28. Brent, meanwhile, was on track for its lowest close since July 19. “Oil prices are under considerable pressure … with COVID concerns once again being front and centre,” said Craig Erlam, senior analyst at OANDA, noting: “Rising Chinese Delta cases and restrictions havecast doubt over the economy in the short-term. Wall Street banks Goldman Sachs, JPMorgan and Morgan Stanley all cut their China growth forecasts on Monday, after export growth forecasts on Monday, after export growth slowed unexpectedly and on concerns that the resurgent coronavirus could crimp economic activity.
DISCLAIMER: This publication is strictly for information purposes only for Zock capital and invest LLC and its employees take no responsibility or liability as to the accuracy and completeness of the information.
For further ./enquiries/information on this publication, please contact Research and Economic Intelligence .
Analyst: Judith Idialu: Zock capital and Investment LLC,
0805 598 0595
Comment here