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NSE May Face More Pressure over Liquidity, Election

By on April 13, 2011

The presidential election re-scheduled for Saturday,  April 16 and the associated uncertainty after the elections is expected to further exert downward pressure on the Nigerian capital market, experts have warned.

In a report made available to THISDAY, analysts at Cowry assets Limited, stressed that added to this is negative impact on local currency liquidity of the planned auction, this week, of N138.33 billion treasury bills, by the Central Bank of Nigeria (CBN).

These factors, Cowry Assets said, will make the equity market performance to remain neutral despite the attractive returns being declared by quoted companies.

According to the experts, “We however remain optimistic of a consistent bull run after a successful election and political transition. We also envisage a sale pressure in the bond market as investors dump their holding to free up liquidity for next week’s planned primary market offers of between N60 billion and N80 billion 3-year and 5-year bonds by the Debt Management Office (DMO).

“Interest rates had increased for most tenor buckets at the interbank market in line with our expectations the previous week. On a week- to-date basis, NIBOR at call rose by 4.9 per cent to close at 11.54 per cent on Thursday.

“Also 3 months NIBOR rose by 0.78 per cent to 13.95 per cent. The market witnessed inflows from maturing Treasury Bills totaling N46.63 which partially offset outflows from both fresh Treasury Bills auctions (valued at N23.37 billion- viz: 42-day T. Bills worth N7.28 billion, 28-day T.Bills worth N2.01bn, 45-day TB worth N7.77bn and 31-day T. Bills worth N6.31 billion) as well as the Asset Management Company’s bond offer of N20.7 billion and bank funding for forex purchase  on behalf of end users.

“In the current week, the central bank intends to issue Treasury Bills worth N138.83 billion via (N44.33 billion; N44 billion on 182-day bills and N50 billion in 364-day bills). The impact of these expected huge outflows will drain liquidity from the banking system with attendant spike in interest rates.

In effect, we project that money market rates will further trend north this current week,” the experts said.

Source : Thisday