The Central Bank of Nigeria (CBN) has refuted the news making the rounds that it has banned banks from trasury bill purchase.
Its Spokesman, Mr. Isaac Okorafor, when contacted yesterday, said the apex bank has not stopped the banks from bidding for bills at Open Maket Operation (OMO) auction on their own account.
A foreign news service reported last week that CBN had barred banks from buying bills for their own accounts at an open market auction, a move intended to force them to lend rather than invest in government debt.
It explained that it was part of the apex bank’s measure to get credit flowing into the economy. “Recently, CBN limited the size of interest-bearing deposits it would hold for banks, the latest in a series of measures aimed at reviving a sluggish economy. The central bank, which had not issued market stabilisation bills for about a week before Thursday’s auction, told banks that bids must be backed by customer demand. In the past, banks have bought government debt rather than assume risk by lending.
“It was unclear if the order applied to Thursday’s auction only. Banks can still purchase bills on the secondary market, ” the news outlet had said quoting a trader. At Thursday’s open market auction, the central bank offered N75 billion of bills, drawing demand totalling N475 billion for the various maturities. The bank sold one-year bills at a yield of 12.25 per cent.
A trader said Thursday’s auction was aimed at non-bank investors, adding that the apex bank has considered offering bills directly to foreign investors to support the currency. CBN had been issuing securities at high yields to mop up the Naira, a policy it maintained for more than two years to attract foreign inflows into bonds and support the local currency.