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Calmness seen in forex market as CBN refunds N105bn MCD to BDC

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By DANLADI BATURE


THE Bureau De Change (BDC) segment of the foreign exchange market(BDC) is expected to enjoy some level of calmness following the refund of N35 million Mandatory Caution Deposit (MCD) to all the 3000 operators by the Central Bank of Nigeria (CBN).

Some analysts said at the weekend that the refund of the total N105 billion is expected to bring some sanity into the market with the possibility of improving the value of the local currency, the naira.
Following the recent development in the operations of BDCs in the economy, the CBN decided to retain N1 million licensing fees.

The CBN in a circular signed by Kevin Amugo, director, financial policy and regulation department, directed all eligible BDCs to apply for a refund of their mandatory caution deposits, attaching evidence of payment and bank transfer details.

Last week, the value of the Naira relative to the dollar witnessed marginal declines amid curtailed speculative demand as the apex bank shut its bi-weekly sales to BDCs. Week-on-week, the Naira tanked by 0.34% with respect to the dollar, to close at N296.00/USD (from N295/USD) at the Bureau de Change segment. Similarly, the local currency also weakened at the parallel (or black) market by the same value to N298.00/USD (from N297/USD). The CBN clearing rate and interbank rate remained at N197.00/USD and N199.10/USD respectively.

Meanwhile, USD/Naira forward contracts at the OTC market moved in mixed directions indicating heightened uncertainty given the current foreign exchange policy climate. The 1 month, 3 month, and 12 month forwards declined respectively to N200.56 (from N200.69/USD in the preceding week), N206.12/USD (from N206.46/USD) and N222.58/USD (from N222.65/USD). However, the spot rate advanced by 1.05% to N199.35/USD (from N197.28/USD).

“This week, we expect the market to respond to the outcome of the Monetary Policy Committee meeting on the devaluation or otherwise of the Naira”, analysts at Cowry Asset Management limited have said.
At the money market, analysts expect the interbank rate to decline amid liquidity boost as the CBN will redeem 274-day treasury bills worth N331.35 billion via Open Market Operation (OMO) and the disbursement from FAAC which is also expected this week.

Nigerian Interbank Offered Rates advanced across all tenor buckets amid strained financial system liquidity. Overnight, 1 month, 3 months and 6 months NIBOR advanced to 4.25% (from 1.08%), 8.77% (from 8.05%), 10.40% (from 9.59%) and 11.79% (from 11.23%). Also during the week, the Central Bank of Nigeria auctioned treasury bills worth N195.96 billion via the primary market, viz: 91-day bills worth N36.79 billion (MR rose to 4.29% from 4%); 182-day bills worth N39.17 billion (MR rose to 7.59% from 6.99%) and 364-day bills worth N120.00 billion (MR rose to 9.33% from 8.05%). Meanwhile, yields on the Nigerian Interbank True Treasury Bills mostly declined- yields on the 1 month, 6 months and 12 months bills slid to 1.23% (from 1.37%), 7.34% (from 8.42%) and 9.18% (from 9.90%) respectively. However, yields on the 3 month bill rose to 4.42% (from 4.31%).

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