Treasury Bills Yield Drops to 15-month Low

MARKET INDICATOR

By Obinna Chima

Yields for the 364-day treasury bills at the last auction dropped to a 15-month low of 15.72 per cent, which may imply the end of abnormal high yield for the debt instrument observed in the market in recent time.

The Debt Management Office (DMO) lowered the yields it offered at the treasury bill auction to raise N130 billion after investors submitted bids four times in excess of the amount it wanted to sell.

The DMO sold N129.77 billion in 91-day, 182-day and 364-day bills at the auction but received bids totalling N526.36 billion.

The interest rate on 364-day treasury bills may have triggered a conversation on interest rate direction for securities trading and pricing in Nigeria, according to an analyst at Ecobank Nigeria, KunleEzun said.

The interest rate performance on 364-day treasury bills rate was a reflection of recent market development relating to federal government decision to sell dollar-backed treasury bills and a possible US$5.5 billion Eurobond issuance in November 2017.

Owing to this, the 364-day treasury bills rate fell from a year to date high of 18.980 per cent in April to 15.7253 per cent in October 2017, thereby indicating 325 basis points drop over six months period.

The Treasury bills, which are issued more frequently in standard benchmarks: 91-day, 182- day and 364-day for refinancing purpose is about N4.211.85 trillion year-to date in 2017.

In addition, the Central Bank of Nigeria (CBN) has issued open market operations (OMO) bills to the tune of N4.722.34 trillion of various maturities at a weighted average rate of 18.32 per cent year to date in 2017.

“Interest rate on 364-day treasury bills is on a downward trend, but how low can it go? The CBN has kept policy interest rate high at 14 per cent to anchor inflation and possibly ensure positive real return on naira denominated government securities in a high inflationary environment.

“Interest rate on 364-day treasury bills will continue to drop, and possibly align with the policy interest rate of 14 per cent in fourth quarter 2017.. However, if the CBN decides to tweak its monetary policy stance to support economic growth, the interest rate might drop further down,” Ezun opined.

At the last auction, investors bid as much as 18 per centfor one-year debt and as low as the 13.25 per cent it paid for the three-month note.

The federal government is considering issuing a $2.5 billion Eurobond before the end of the year, the latest in a series of debt sales as the government seeks to fund a record budget for 2017.

The Director General of the Debt Management Office (DMO), Patience Oniha, disclosed this recently.

The federal government’s N7.44 trillion budget was meant to fuel growth after the economy pulled out of its first downturn in a quarter of a century in the second quarter of 2017. The mid-November issue would complement the $1.5 billion raised in Eurobond sales in February and March. She had said Nigeria needed to build stronger and responsive institutions that could support infrastructure agenda of the government. According to her, the government had proposed to channel new borrowings into capital investments instead of consumption.

Meanwhile, following expectations of improved economic stability in Nigeria, BlackRock Incorporated, an American global investment management corporation based in New York City, plans to take advantage of opportunities in Nigeria’s bond market as part of efforts to raise performance in its bond offerings.

BlackRockfavours Nigeria as well as oil producers such as Russia, Colombia and Kazakhstan, the company’s Sergio Trigo Paz, told Reuters in an interview, highlighting the West African country as one where he is planning to enter local markets.

“We are moving into some countries even deeper because we feel that the macro environment is much more stable than it was and likely to improve going forward,” Trigo Paz said at the New York headquarters of the world’s largest asset manager.

“With regard to sub-asset classes, local markets are still the place to be,” he added, noting that he expects the United States dollar to be less of a driver for local market returns.

Investors have been piling into Nigerian bonds due to high yields and stable currency for investors especially as an improving inflation outlook may mean that yields could start to decline.

 

Anchor Borrowers’ Programme

Over 200,000 small holding farmers in 29 states of the country, cultivating eight different commodities have received N43billion so far disbursed by the CBN under its Anchor Borrowers’ Programme (ABP) which was launched in November 2015, Governor of CBN, Mr. Godwin Emefiele disclosed last week.

According to Emefiele, the ABP has so far achieved tremendous success in terms of outreach and coverage, making it one of the most successful of CBN’s development finance initiatives to date.

Speaking during the launch of the Presidential Initiative on Agriculture and Youth Empowerment Programme,  Emefiele said though the government was targeting an expanded job generation from the scheme, rising from its initial target of 10,000 fresh jobs to 130,000 new jobs in each of the states.

“The 10,000 target per state is the very least. That is if the state is lazy. Already, Jigawa has generated 56,000 jobs along the agriculture value chain from this programme. So, we have looked at it and we know 130,000 new jobs can be generated in each of the 29 states that have keyed into the scheme. It is new jobs and new initiatives. After attaining food sufficiency, the next stage is export to increase our foreign reserves.

“Currently, the success of the programme has culminated in wealth creation for the small holder farmers, who hitherto had been crowded out of the formal financial system, deepening of markets and value addition along the value chain of the various commodities.”

New CBN Deputy Governor 

President MuhammaduBuhari last week appointed 40-year-old Executive Director, Diamond Bank, Mrs. Aishah Ahmad as the next Deputy Governor of the CBN.

Ahmad whose appointment is subject to Senate confirmation, will replace Dr. Sarah Alade who retired in March this year. A statement by the president’s chief spokesman, Mr. Femi Adesina, said the appointment was made in accordance with Section 8(1)(2) of the CBN (Establishment) Act.

Adesina also said Buhari, who had sent the nominee’s name to the Senate President, Dr. BukolaSaraki, for the Senate’s confirmation, urged the parliament to expeditiously confirm Ahmad’s appointment to enable her resume work immediately.

Adesina said the president equally sought the Senate’s confirmation of newly appointed members of the Monetary Policy Committee (MPC) of the CBN.

According to him, the new appointees will replace four members of MPC whose tenure will expire at the end of the year. The nominees are Professor Adeola Festus Adenikinju, Dr. AliyuRafindadiSanusi, Dr. Robert ChikwenduAsogwa and Dr. Asheikh A. Maidugu.

He added that the new MPC nominees, if confirmed by the Senate, would resume duty next January. Ahmad, the deputy governor nominee, boasts an impressive resume, spanning 20 years in banking and finance in Nigeria and the United Kingdom.

Forex Proceeds Repatriation 

In line with its drive to ramp up the country’s foreign exchange (forex) earnings, the Central Bank of Nigeria (CBN) disclosed that henceforth, exporters that fail to repatriate their forex earnings within the stipulated time would be blacklisted from the banking system.

The acting Director, Corporate Communications, CBN, Mr. Isaac Okorafor, who said this while briefing journalists at the end of a Bankers’ Committee meeting in Lagos, stressed that any exporter that fails to abide by the rules would be sanctioned and would not have the opportunity to transact business with any bank.

Earlier, the Chief Executive Officer of Unity Bank Plc, Mrs. OluwatomiSomefu, revealed that disbursement for the N26 billion special fund that was set up by the Bankers’ Committee to provide equity contribution to SMEs particularly in the agric sector, would commence this quarter. She said the framework for the fund would soon be developed before the end of the year.

“The Bankers committee can confirmed that this is being finalised and disbursement will commence by the end of this quarter 2017,” she explained.

According to Somefu, to further support growth of the non-oil sector, the CBN has created a special export intervention scheme, which is expected to generate additional foreign exchange to the country.

“This will be closely monitored and we expect a lot of our SMEs to benefit from this scheme. The issue we have in the past is the failure of some exporters to repatriate the foreign exchange generated, and the CBN has agreed with the Bankers Committee to sanction defaulting exporters,” she added.