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Money market awaits N2.118trillion inflow in April

By BusinessNews Staff on April 16, 2015

A total inflow of about N2.117 trillion is expected to hit the money market from the various government maturing securities and Federation Account Allocation Committee (FAAC) this month, a report by FSDH Merchant Bank Limited has shown.

On the other hand, the expected outflows from the various sources such as government securities and statutory withdrawals are estimated at N666.09 billion during the month.

Analysts at FSDH Merchant Bank Limited revealed this in their latest monthly report. They however pointed out that these does not include the possible Central Bank of Nigeria’s (CBN’s) interventions at the inter-bank segment of the FOREIGN EXCHANGE market; and NNPC withdrawals from the system, which are most times difficult to estimate.

They also expect that the CBN would issue treasury bills at the long-end (182day and 364day) at slightly lower yields in April 2015 due to the expected liquidity and the renewed interest from the institutional investors.

“The foreign investors believe that the EXCHANGE RATE has not reached an equilibrium position. Thus, they may be less aggressive to enter the market until they are sure that the exchange rate risk has disappeared,” the analysts added.

The report projected that yields would drop slightly this month. It listed some factors that would drive yields on the fixed income securities in the next few months to include the expected liquidity in the market, the renewed interests in the government securities by the institutional investors as well as the political stability in the country.

They advised fund managers to INVEST in longer tenored fixed income securities, adding that deposit rate and yields on the fixed income securities may appear attractive.

“The current high yields may attract more foreign portfolio INVESTMENTS (FPIs) into the Nigerian fixed income securities market, as soon as the general election is successfully conducted. Placement of funds with banks to earn attractive yields will be a good strategy.

“The yields on the FGN Eurobonds have remained relatively stable, as well as lower than that recorded in February 2015. The prices of both the 10 year 6.75% FGN Eurobond January 2021 and the 10 year 6.375% FGN Eurobond July 2023 closed the month higher than the par values,” they added.

Nigeria’s credit rating was lowered by Standard & Poor’s (S&P) last month because of falling OIL PRICESand rising political risks that had trailed the postponement of the recently concluded general elections in February. The country’s foreign and local currency long-term rating was then cut one level to B+, four levels below investment grade, while the outlook was changed to stable. Meanwhile, Moody’s Investor Service, another global credit rating agency notes that the Nigeria’s recent peaceful transition of power is credit positive, but admits that the Nigeria’s economic challenges still remain. It had added that despite the external and fiscal headwinds facing the government, Nigeria’s balance sheet is very strong, with the government enjoying a low level of debt and access to a domestic CAPITAL MARKET that is deep and rapidly developing.

“In our opinion, the various threats identified by Fitch Ratings on the Nigerian economy had been factored into the pricing of the domestic equity and fixed income instruments by both local and foreign investors. We do not expect any further price correction from the downgrade of the Nigeria’s credit rating,” the report added.

[ThisDay]

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