07 Jun

Daily Watch – Osinbajo outlinesoutlines Niger Delta strategy, Excess liquidity triggers demand for securities

  • Nigeria’s naira weakened further against the American dollar at the parallel market on Monday, exchanging at ₦357 for a dollar as against ₦350 it traded on Friday. However, pending the release of details for the operation of the proposed flexible exchange rate, the official rate remained at ₦197 per dollar. Traders at the market complained about the delay in the release of details of the flexible exchange rate as proposed by the CBN.
  • Nigeria may issue another Eurobond soon as a delegation led by the Minister of Finance, Kemi Adeosun, meets bond investors in London today. The FG hinted of plans to borrow from multilateral agencies and the international capital market to fund its huge budget deficit. Nigeria, currently on the brink of recession, is battling major fall in oil production amid the global fall in oil prices. Yields on Nigeria’s existing dollar debt are almost twice as high as those for Kazakhstan and Colombia, two other developing-nation oil producers. While they’re interested in plans to revive growth, investors said they would also demand to know when and how the CBN would end capital controls and a currency peg that have starved the country of dollars and slowed foreign investment to a trickle.
  • The Vanguard is reporting that the volume of idle cash in the interbank market has risen to ₦408 billion, triggering 156 percent excess demand for government securities. Excess liquidity rose by 32 percent from ₦277 billion the previous week, to close at ₦408.3 billion last week. The sharp increase was driven by fresh inflow of ₦141 billion from statutory allocation funds, and ₦144 billion from payment of matured treasury bills. As a result, investors demanded for ₦498 billion worth of treasury bills, 156 per cent higher than the ₦194 billion offered for sale by the CBN. At the primary market, investors demanded ₦394 billion worth of bills, while the regulator offered and sold ₦144 billion.
  • Vice President, Yemi Osinbajo has announced that the FG has evolved two strategies – engagement and security – to halt attacks on oil installations as a result of the renewed insurgency in the Niger Delta region. The renewed insurgency has impacted negatively on the economy, affecting gas supply to power plants and drastically reducing the country’s oil production to as low as 800,000 bpd. Osinbajo said the FG was engaging leaders and people of the Niger Delta regarding the spate of attacks on oil installations, an act he described as economic sabotage. But besides reaching out to the people of the area, Osinbajo assured that the government was also beefing up security in the region. According to him, the focus of the Buhari Administration “is to ensure that the man on the street in the Niger Delta receives the benefit from all that is available there.” He also called on leaders in the region to be accountable to the people.