NNPC N20bn Shoots Up Interest Rate
Ecomony
By Ayodele Aminu
Nigeria National Petroleum Corporation (NNPC) withdrawal of N20 billion accumulated credit by major oil marketers for product supply over the weekend, triggered liquidity squeeze in the money market, causing cost of funds (interest rates) to inch up further.
Consequently, investment in the Government Securities slid further by some 58.2 per cent or N39.1billion, a development that led to the withdrawal of just N67.27 billion from the economy by the Central Bank of Nigeria (CBN) at the weekend. This is against the N28.11 billion mopped up penultimate week.
The Government Securities Trading comprising the Open Market Operations (OMO) and the Primary Market Auction (PMA) are some of the windows available for investment through which the CBN controls the amount of liquidity in the system by selling treasury bills from which the Federal Government borrows indirectly from banks, thereby mopping up their excess funds.
On monthly bases, the NNPC usually grants the major oil marketers, a 15-day credit facility for the lifting of petroleum products from its depots and later recalls such funds.
Following the withdrawal of the money owed on product supply and coupled with penultimate week withdrawal of parastatal funds from the system by the CBN, cost of funds at the money market inched up at the weekend with call money trading for as high as 18/19 per cent at the close of business Friday.
Reflecting the dearth of fresh funds in the system, a breakdown of the amount withdrawn from the economy last week shows that no bill was bought on Monday and Tuesday. N19 million, N1.191 billion and N125 million were withdrawn on Wednesday, Thursday and Friday respectively through the daily OMO, while the remaining N26.77 billion was mopped up through the PMA.
At Wednesday's OMO where bills with life span of 35 days and maturity date of August 18, 2004 were sold, all the N19 million bills received were sold at the issue and bid rate of 14.2500 per cent apiece, while the true yield stood at 14.4465 per cent.
No bills matured for repayment, putting the net sale/purchase position at N19 billion.
At Thursday's OMO where bills with life span of 21 days and maturity date of August 5, 2004, were sold, all the N1.191 billion worth of bills received were allotted at the issue and bid rates of 14.2500 per cent apiece. The true yield stood at 14.3678 per cent, while bills amounting to N3.945 billion matured for repayment, putting the net sales/purchase at N2.754 billion.
At Friday's OMO where bills with life span of 21 days and maturity date of August 6, 2004, were sold, all the N125 million worth of bills received were also allotted at the issue and bid rates of 14.2500 per cent apiece. The true yield stood at 14.3678 per cent. Bills amounting to N650 million matured for repayment, putting the net sales/purchase at N525 million.
At the Primary Market Auction - a 91 days tenured investment with October14, 2004 as its maturity date, bills worth N26.77 billion were purchased out of the N65 billion worth of bills offered, at the issue rates of between 13.5000 - 14.5000 per cent per annum. Bid rates also ranged between 13.5000 - 14.5000 per cent per annum, while the true yield stood at 15.0431 per cent per annum.
Bills amounting to N26.62 billion were repaid, putting the net sales (purchase) position at N153 million.
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