Omodele Adigun
The Central Bank of Nigeria (CBN) will this week seek refinance N179 billion worth of maturing treasury bills (TBs) via primary auction of 91-day bills, 182-day and 364-day notes, according to financial analysts.
This may be the next level of the apex bank’s sale of N178.7 billion worth of primary market treasury bills last week in three tenors of 91, 182 and 364 days.
The 182-day and 364-day papers were sold at higher stop rates of 11.79 per cent and 13.5 per cent respectively from 11.59 per cent and 12.9 per cent in the previous auction.
The rates, according to analysts at Cowry Assets Management Limited, are expected to rise higher this week when the apex bank conducts an auction to refinance N179.75 billion worth of maturing bills.
“In the new week, CBN will refinance T-bills worth N179.75 billion, viz: 91-day bills worth N3.00 billion, 182-day bills worth N8.39 billion and 364-day bills worth N168.36 billion. We expect their stop rates to rise amid increased investors’ demand for higher returns on investment,” they said.
Stop rates on the TBs have been on the rise since August with average increase of 178 points as against the average decline of 296 points recorded from January to July.
Analysis showed that stop rate on the 91-day TBs, which dropped by 215 points to 9.75 per cent in July, from 11.9 per cent last December, had risen by 184 points to 11.59 per cent. Similarly, stop rate on the 182-days bills which dropped by 290 points to 10.6 percent in July from 13.5 per cent in December, had risen by 1.19 points to 11.79 percent last week. Also stop rate on the 364-day bills which dropped by 382 points, to 11.18 per cent in July from 15 per cent in December, had risen to 13.5per cent last week.
The upward trend in TB rates is driven by the desire to lure back foreign portfolio investors (FPIs) to the treasury bills market and revive dollar inflow into the foreign exchange (forex) market and stop the two-month hemorrhage in the external reserves.
The pressure came to fore in the Foreign Capital Importation data for second quarter of 2019 released by the National Bureau of Statistics (NBS) last week. The data showed that FPIs, which account for 74 per cent of foreign capital imported into the country, dropped by 40 per cent, quarter-on-quarter, to $4.29 billion in the second quarter of this year from $7.1 billion in the previous quarter.
Further analysis showed that foreign investments in money market instruments (tbs), which accounts for over 80 per cent of total FPIs fell by 41 percent, quarter-on-quarter, to $3.5 billion in second quarter of 2019 from $5.9 billion in first quarter of the year.
Meanwhile, the cbn is expected to sustain its liquidity mop up operations in response to inflow of N356.5 billion from maturing secondary market open market operations (OMO) bills.
Last week, the interbank money market enjoyed inflow of n347 billion from matured omo bills. the CBN, however, auctioned and sold OMO bills to mop up N527 billion, a development which caused average short term cost of funds to rise by 2,011 points.
Data from FMDQ showed that interest rate on collateralized (open buy back or obb) lending rose by 1,922 points to 22.43 per cent last week from 3.21 per cent the previous week. similarly, interest rate on overnight lending rose by 2,100 points to 24.71 percent last week from 3.86 percent the previous week.