Business
Nigeria mops up liquidity as dollar remains volatile in global market
Nigeria sold 107.64 billion naira ($353 million) in treasury bills on Friday in a move to soak up excess liquidity from the banking system and curb pressure on the currency, traders said.
The Central Bank of Nigeria sold 54.42 billion naira in the 167-day open market operations (OMO) treasury bills at 18 percent and 55.22 billion naira paper at 18.5 percent, traders said.
But the effect of the sale was countered by additional liquidity from the repayment of matured bonds forcing overnight lending rate down to 5 percent on Friday from 30 percent at the start of the week.
Traders said banking system liquidity was 246 billion naira in credit on Friday, up from 206.96 billion naira in deficit a week ago. The money markets were also expecting the monthly government budget disbursement next week.
On the forex market, the naira eased on the black market to 390 per dollar and held steady on the official market at 305.85.
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Meanwhile, the Greenback was vulnerable to heavy losses on Friday, with prices tumbling towards 98.80 as the mixture of soft economic data from the US this week, and rising uncertainty over Trump’s proposed tax reforms weighed on sentiment.
Much attention may be directed towards the pending Q1 2017 US GDP report that is being released later today and is widely expected to display a slowdown in economic momentum as accelerating inflation pressured consumer spending.
With a potential slowdown in first quarter US economic growth this year weighing on expectations of the Fed raising interest rates in June, the Dollar may be at threat of further depreciation. From a technical standpoint, the Dollar Index is heavily depressed on the daily charts. Persistent weakness below 98.80 could encourage a further decline towards 97.50.
Oil markets remain entangled in a fierce tug of war, with oversupply concerns and optimism over OPEC stabilizing the saturated markets. Although WTI Crude staged an impressive rebound during early trading on Friday amid a potential OPEC cut extension, the recent reports of Libya’s biggest oil field reopening may compound oversupply fears, consequently capping upside gains.
The live threat of US Shale’s incessant pumping undermining the OPEC production cut extension may expose oil prices to steeper losses. From a technical standpoint, WTI Crude remains bearish on the daily charts with bears potentially exploiting the technical bounce to drag prices lower. Previous support at $50 could transform into a solid resistance that opens a path towards $47.50. In an alternative scenario, a breakdown below $49.00 may open a similar route to $47.50.
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