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EXCLUSIVES Interest rates fall further as portfolio investors flood market - BUSINESSDAY

MARCH 15, 2019

…CBN auctions N89.5bn T-Bills at 10.75%-12.84%…Oversubscribed by N200.17bn


Interest rates in Nigeria’s fixed income market have been further lowered following the influx of foreign investors after the general elections.

The interest rate which the Central Bank of Nigeria (CBN) offered for the Nigerian Treasury Bills (NTB) auction on Wednesday was between 10.75 percent and 12.84 percent for the various tenor days, as against 11.9 percent and 15 percent in February.

Consequently, the CBN on Thursday allotted a total of N89.5 billion Treasury Bills, which it auctioned on Wednesday. The NTB instrument was significantly oversubscribed by investors to the tune of N200.17 billion.

“The recent demand can be traceable to the massive influx of FPIs after the elections. This has led to the decline in Treasury Bills rates. As a result, CBN is taking advantage of this to lower the interest rates,” said Ayodeji Ebo, managing director, Afrinvest Securities limited.

A breakdown of the auction summary revealed that the CBN offered a total of N70.50 billion for 365-day tenor at the rate of 12.85 percent. The offer was oversubscribed by N539.68 billion at the bid range rate of between 12.25 percent and 15.99 percent.

The CBN offered N14 billion for 182-day tenor, which was also oversubscribed by N46.47 billion. It was bid at the range rate of between 12.00 percent and 14.00 percent and was sold at a stop rate of 12.5 percent.

For the 91-day tenor of the NTB, N5 billion was offered by the CBN at the stop rate of 10.75 percent as against 11.9 percent in February. The offer which was allotted to investors on Thursday was oversubscribed by N14.36 billion at bid range rate of between 10.5 percent and 13 percent.

The apex bank has continued to use the sales of government securities to manage price stability in the country. The CBN and its Monetary Policy Committee (MPC) have kept policy rate unchanged since July 2016, when the committee voted by five to three for a 200 basis point-hike to 14 percent in a response that was aimed at fighting inflation.

The next MPC meeting is scheduled to hold March 25 and 26, 2019, according to the meeting calendar on the CBN website.

“We expect the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to maintain the current tight monetary policy stance when it meets on 25-26 March, 2019,” said Ayodele Akinwunmi, head of research, FSDH Merchant Bank Limited.

He said the CBN needs to maintain its tight monetary policy stance to ensure price stability and also consider the removal of the multiple exchange rate system.

Nigeria’s external reserves have increased by 0.49 percent to $42.87 billion as of March 12, 2019 compared to $42.66 billion on March 8, 2019, data on the CBN website indicated. The external reserves dropped consistently in the month of February.

The nation’s currency on Thursday depreciated marginally by 0.02 percent to close at N360.36k per dollar compared to N360.29/$ it traded the previous day at the investors and exporters (I&E) foreign exchange window, data from the FMDQ showed.

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