Investors rush CBN Bills after better Yield on Investment–Report


 By Niyi Jacobs

Amidst scarce alternative investment windows in the financial markets, the monetary authority has hinted that investment in CBN bills in August increased owing to the attractive yield.

The apex bank hinted about the development in its monthly economic report for August 2021. It said a total of N60.00 billion, N152.07 billion and N60.00 billion of CBN bills were, respectively, offered, subscribed and allotted.

The offer, subscription and allotment, according to CBN were considered to be higher than the ₦40.00 billion, ₦104.20 billion and ₦37.00 billion recorded in July.

The report said the tenors of CBN bills used in conducting Open Market Operations (OMO) auctions in the review month ranged from 89 to 355 days, with bid rates averaging 8.45 plus or minus 1.65 per cent.

Meanwhile, the stop rates averaged 8.55 plus or minus 1.55 per cent in the period, according to the CBN report for August 2021. Nigeria’s apex bank hinted that repayment of matured CBN bills was ₦401.24 billion, translating to a net injection of ₦341.24 billion through this medium.

It also revealed that Nigerian Treasury Bills and long-term Federal Government of Nigeria (FGN) Bonds were issued at the primary market on behalf of the Debt Management Office in August 2021. 

According to the report, a total of ₦208.69 billion, ₦792.49 billion and ₦463.66 billion were, respectively, offered, subscribed, and allotted at the auctions held in August with 91-, 182- and 364-day tenors.

It hinted that at the 91-day auction, total subscription and allotment were ₦10.99 billion and ₦8.34 billion, respectively, with bid rates averaging 6.25 plus or minus 3.76 per cent, while the stop rate was 2.50 per cent.

For the 182-day auction, CBN said the total subscription and allotment were ₦29.27 billion and ₦26.61 billion, respectively. The bid rates averaged 7.74 (±4.26) per cent, while the stop rate was 3.50, according to the CBN report.

At the 364-day auction, total subscription and allotment were ₦752.23 billion and ₦428.71 billion with bid rates averaging 7.98 (±2.03) per cent, while stop rates averaged 7.08 (±0.28) per cent.

Federal Government of Nigeria (FGN) Bonds of 10-, 20- and 30-year tranches were re-opened during the review month, according to the report.

The term to maturity of the bonds ranged from 6 years and 6 months to 28 years and 7 months. The total amount offered, subscribed and allotted, were ₦150.00 billion, ₦360.02 billion and ₦260.09 billion, respectively.

The bid rate on all tenors averaged 12.25 (±1.75) per cent, while the marginal rates averaged 12.20 (±0.60) per cent.

It was noted that the banking system liquidity fluctuated and ended low in August, reflecting the provisioning and settlement for foreign exchange and CBN bills’ purchases vis-à-vis varied liquidity injection through FAAC and CBN bills repayment.

Hence, key money market and lending rates rose above their trend levels, according to CBN.

The report stated that daily inter-bank call and Open-Buy-Back rates averaged 13.45 per cent (±4.06) and 13.19 per cent (±8.15), respectively in the month.

Other rates such as the 7-, 30- and 90-day NIBOR, averaged 14.01 per cent, 11.86 per cent, and 12.94 per cent, respectively, compared with 13.39 per cent, 12.30 per cent and 13.50 per cent in the preceding month.

Relative to their levels in the preceding month, CBN said the average term deposit rate rose 0.04 percentage points to 4.28 per cent.