Bonds Yields Dip, Naira Strengthens After Rate Cut
The Federal Government’s five-year bond yield dropped by more than 200 basis points on Friday, after the Central Bank of Nigeria (CBN) cut Monetary Policy Rate to 12.5 per cent from 13.5 per cent.
Bonds yields fell across maturities with the most liquid five-year paper fell to 6.5 per cent.
The naira also strengthened at the parallel market, appreciating from N460 to dollar to N450 to dollar. The CBN had cut its benchmark lending rate to stimulate growth in the economy.
The strengthening of the naira has also been linked to planned reopening of Bureaux de Change (BDCs) after several weeks of closure had hampered supply of dollars and driven buyers to the unofficial market.
“Flow from BDCs helped the naira appreciate in the parallel market from 460 to 450 per dollar this week. Support also comes from the CBN taking measures to boost forex liquidity amid higher oil prices and resumed exports,” one analyst said.
The Association of Bureaux De Change Operators of Nigeria (ABCON) has asked foreign exchange buyers not to patronise street traders because of the dangers with such transactions.
In a notice to BDC operators and directors, ABCON President, Alhaji Aminu Gwadabe, advised the public not to go into panic buying, hoarding and partronising the street traders as the CBN has enough reserves to sustain supplies when the BDCs return.
The CBN had also acknowledged the contributions of BDCs in promoting stable exchange rate in recent months, despite challenging circumstances facing the Forex market due to drop in crude oil prices.
Gwadabe advised BDC operators to observe strict guidelines on the preventive measures on the dangers of the COVID-19, wear their mask, gloves, and frequent washing of hands.
“We also want to advise members to strictly comply with their regulatory obligations on their daily operation. If you are trading be cautious not to fall under the hand of security agencies. Do not be involved in giving black market rates street trading as doing so might create regulatory breach,” he said.
Gwadabe said the CBN/Nigerian Financial Intelligence Unit (NFIU) is tracking large movements of funds within the financial sector and the need to be cautious.