The past week saw market liquidity open long at ₦951.5 billion, with bonds auction, T-bills auction and OMO auction held during the week. Liquidity is estimated to close at about ₦242 billion long for the week, and a total of ₦845.6 billion was withdrawn from the market through the weekly auctions. Despite liquidity in the system, this week’s auctions saw rates go up, especially on the 9-year bond, begging the question of whether the market was expecting another rate hike at July’s MPC meeting. Notwithstanding, one thing is for sure: the increased liquidity cost makes traders reluctant to hold new positions.
In the FX space, the naira has steadily declined against the US dollar, hitting a monthly low of $/₦1,510.10 on Thursday and closing at $/₦1,505.30 on Friday. It was reported that the Nigerian Autonomous Foreign Exchange Market (NAFEM) was on track to hit its lowest FX turnover in five months as persistent dollar shortages continued to strain the naira.
The rescheduled bond auction from the previous week took place last Monday. It featured the re-issue of the April 2029 (5-year), February 2031 (7-year) and May 2033 (9-year) tenors. On offer was a total amount of ₦450 billion. Surprisingly, although liquidity was long in the system, there was a total subscription of a little above ₦300 billion, even with a money supply of over ₦950 billion in circulation on the day. The stop rates rose significantly; the 5-year tenor had a stop rate of 19.6400% (an increase by 35bps), the 7-year bond closed at 20.19% (an increase by 45bps), and the 9-year bond closed at 21.5000% (an increase by 161bps). The performance could either be attributed to the cost of funding, making it harder for traders to open new positions or the market expectation of another rate hike at the MPR meeting in July. Irrespective, bond yields at 21.5000% appear to be the highest bond rate the DMO has issued thus far.
The NTBs auction was conducted on Wednesday with the 91-day, 182-day and 364-day tenors, respectively. There was a total offer of over ₦220 billion and a subscription of over ₦770 billion. Seeing that the stop rate for the bond auction rose to 21.5000%, it was not surprising that investors were quite aggressive, evinced in the range of bids received. Bids went as high as 24% for the 91-day, 21% for the 182-day and 25% for the 364-day. However, the stop rates for the first two (2) tenors were maintained from the last auction, while the 364-day tenor rose by 18bps to 20.68%.
The OMO auction for June 28, 2024, saw no subscription for the 81-day tenor, meaning there was no demand for this tenor; consequently, no sales were made, and no stop rate was set. Like the 81-day tenor, there was no demand for the 179-day tenor, resulting in no subscriptions, sales, or stop rates. A striking similarity to occurrences from the previous week.
The 347-day tenor had a total sale of ₦264.33 and a stop rate of 22.4800%, with subscriptions amounting to ₦295.92 against an offer of ₦100.00 billion. The oversubscription of this tenor indicates a high demand for longer-term investments. The bids ranged from 22.17% to 24.00%, with the stop rate indicating that a large portion of bids were accepted.
In an interview with Bloomberg TV on Tuesday, the Governor of the Central Bank of Nigeria (CBN) reported a total foreign exchange inflow of approximately $24 billion in the first quarter of 2024. He noted that the monetary policy tools used by the apex bank are positively impacting the FX market, with Q1 2024 inflows being approximately 50% higher than those recorded in previous quarters since 2021.
Further, he reported that the CBN had also established a committee to enhance the inflow of diaspora funds into the official FX market. The committee, which reports directly to the Governor, aims to double the foreign exchange inflow from international monetary operations. The initiative was reported to have demonstrated positive results, with an increase in remittances from Nigerians abroad.
According to data on the CBN website, Nigeria’s FX reserves were at $33.91 billion in June 2024, a positive contrast to the figures reported in March, where the apex bank reported over $1.5 billion in FX inflows, indicating the effectiveness of its monetary policy measures.
As of Thursday, June 27, 2024, FX turnover for the month was $3.14 billion, a significant decline from the $4.61 billion exchanged in May. The daily average FX turnover in the official market for June, up to that date, was $196.46 million, a 6.2% decrease from the $209.39 million daily average recorded in May 2024. The naira has been trending downward, averaging ₦1,486.63 per dollar in June, compared to ₦1,435.87 in May 2024 and ₦1,244.66 in April 2024.
Crude oil prices rose on account of expectations of a strong summer driving demand and concerns over supply disruptions amid escalating tensions in the Middle East and drone attacks on Russian refineries. The weakening US dollar also bolstered crude prices, with both benchmarks posting a 3% gain last week, their second consecutive weekly increase, as the dollar pulled back from an eight-week peak.
Following substantial drops in US crude and gasoline stocks, Traders are focused on Wednesday’s inventory report. This report is anticipated to provide additional insight into ongoing robust gasoline demand trends.
Today, Ethereum (ETH) remains one of the major cryptocurrencies in the market. However, the price of ETH is unstable and could vary throughout the day due to various factors, including supply and demand on the open market, momentum built or knocked down from some news or regulatory authorities, trading activities and wars.
Ethereum is also an open-source, decentralised platform and blockchain, which allows developers to build and deploy smart contracts and decentralised applications (dapps). Developed by Vitalik Buterin and his team of experts and innovators in the last quarter of 2013, Ethereum went live in 2015. When it was first sold, ETH could be purchased for under a dollar; at the time of this publication, ETH is currently priced at around $3,500. The evolution and historical details of cryptocurrency paint a clear picture, leaving its potential customers with a choice of whether to learn and understand its workings. Based on the real-life use case of cryptocurrencies, it can be inferred that cryptocurrencies are here to stay.
The Ethereum blockchain’s native cryptocurrency is ETHER (ETH), which is used to compensate participants who perform computations and validate transactions on the network. Due to its flexibility and programmability, it is widely used for creating decentralised (DeFi) applications, non-fungible tokens (NFTs) and other blockchain-based projects.
Governments worldwide have tried for over a decade to stop cryptocurrencies and the blockchain, to no avail. Some countries like the United Arab Emirates (UAE) and Malta have openly embraced the blockchain and crypto, while others are yet to accept it.
One prominent platform that uses ether (ETH) cryptocurrency for gas fees is MetaMask. MetaMask is a decentralised exchange (DEX) where people anonymously carry out transactions using their unique address (called wallet address). This address cannot be replicated on the blockchain. The cost of transferring or converting one cryptocurrency to another is gas fees. Gas fees on MetaMask and even on centralised exchanges (CEX) are usually very high on regular days but can be very cheap or low, mostly on Sundays. Many experienced traders use this avenue to do most of their transactions to avoid the weekly rush that kicks in on Monday mornings.
With no major auction this week and the market remaining long, expectations are for an OMO auction to be conducted this week. The past week’s auction results show that the market is getting wary of new positions with higher rates at auctions. As the market waits
for June inflation numbers and the MPC meeting slated for July, we believe caution will be applied at auctions.
June’s inflation report will determine how aggressive the MPC will be at July’s meeting; one thing is for sure: the market will be looking for some news that the rate hike will end.
