Banks, BDCs buy $2.84bn forex from CBN in November  

By Moses Obajemu

Foreign exchange sales by the Central Bank of Nigeria (CBN) to the authorised dealers amounted to $2.84 billion in the month of November 2019, as against $3.17 billion in October 2019. This represents a decrease of $33 million.

According to the Central Bank of Nigeria in its November 2019 ‘Economic Report’’, foreign exchange inflow into, and outflow from the CBN in November 2019 were $3.72 billion and $4.31 billion, respectively, resulting in a net out flow of $0.59 billion.

Similarly, aggregate foreign exchange inflow into and outflow from the economy were $9.84 billion and $4.70 billion, respectively, resulting in a net inflow of $5.14 billion.

The report indicated that as a result of the shortfalls in both the inflows to the CBN and the economy when compared with the outflows during the review period, the nation’s gross external reserves fell to $38.78 billion at the end of November compared with $39.61 billion at the end of October.

It explained that In line with the CBN’s tight monetary policy stance, excess liquidity, arising from maturing CBN bills and fiscal injections, was consistently mopped up  through Open Market Operations (OMO) auctions.’

The impact of the new CBN directive on OMO auctions ,had seen portfolio switch from the money market to the capital market, leading to a crash in treasury bill rates. In the month under review, OMO auctions culminated in the withdrawal of N694.83 billion as at November 26, 2019 through the sale of CBN bills tenored at 82-364 days, with stop rates ranging from 11.5000 per cent to 13.3399 per cent. This represented a decrease of 60.9per cent, compared with N1,779.39 billion sold in October 2019

The report revealed that aggregate credit to the domestic economy(net),on month-on-month basis, fell by 3.0 per cent to N20,527.34 billion at end-October 2019, in contrast to the growth of 4.9 per cent and 1.8 per cent at the end of the preceding month and the corresponding period of 2018, respectively.

The development, the CBN explained, was attributable to the 13.4per cent decline in net claims on the Federal Government.

“Relative to the level at end-December 2018, aggregate credit to the domestic economy (net), rose by 26.4 per cent, compared with the growth of 30.3 per cent and 3.7 per cent at end-September 2019 and the corresponding period of 2018, respectively. The growth in aggregate credit reflected the increase of 86.0 per cent and 13.6 per cent in net claims on Federal Government and claims on the private sector, respectively.

The CBN explained that commercial banks and the merchant banks continued to access the standing facilities window to square-up their positions in November 2019.

“The trend at the CBN standing facilities window showed a decline at the standing lending facility (SLF) window, as against the increased patronage at the standing deposit facility (SDF) window. Applicable rates for the SLF and SDF remained at 15.50 and 8.50 per cent, respectively.

“The total SLF granted,during the review period,was N662.44 billion (made upof N490.29 billion direct SLF and N172.15 billion intraday lending facilities (ILF) converted to overnight repo). Daily average was N41.4010 billion in the 16 transaction days from November 1 –26, 2019.

“Daily request ranged from N0.48 billion to N126.74 billion. The total interest earned was N0.37 billion. The total SDF granted during the review period was N443.63 billion with a daily average of N26.09 billion in the 17 transaction days from November 1-26, 2019. Daily request ranged from N6.30 billion to N42.75billion. Cost incurred on SDF in the month stood at N0.16 billion”, it said.