CBN Lures Investors with Higher Treasury Bills Yield

•Stock market losses N187bn

Kayode Tokede

The average yield on the 356-day Nigerian Treasury bills (NTB) increased to 12.15 per cent yesterday, from the previous 5.94 per cent auction, just a day after the Monetary Policy Committee of Central Bank of Nigeria (CBN) raised in its Monetary Policy Rate (MPR) to 18.75 per cent from 18.5per cent.

According to the CBN NTB auction result obtained by THISDAY, the 91-day interest rate increased to six per cent from 2.86 per cent, while 180-day auction interest rate was at eight per cent from 3.5per cent.

The CBN offered to raise N261.3 billion at the 364-day NTB auction, but recorded total subscription and allotment of N383.88 billion and N255.4 billion respectively.

Consequently, at the 91-day NTB auction, the CBN offered investors N1.73 billion and it recorded total subscription of N7.84 billion and CBN eventually allotted N2.85billion.

Commenting on the development, the CEO, Wyoming Capital and Partners, Mr. Tajudeen Olayinka, “the essence is to encourage foreign inflows that could help improve dollar liquidity in the foreign exchange market and cause a moderation in naira exchange rate until the market attains equilibrium level.

“I have no doubt that it was the most appropriate decision on the part of CBN and government at this time. There’s need to improve dollar liquidity that will eventually force domestic interest rate to moderate subsequently.”

On their part, analysts at Cordros Research, noted that bullish sentiments have dominated the fixed income market amid the structurally buoyant system liquidity.

Commenting on the implication of MPR hike on fixed income market, they stated: “We expect the financial system liquidity profile to remain healthy in the near term, partly driven by increased FAAC inflows.

“With our expectation that the MPC is at the end of its monetary policy tightening cycle, risk appetite for mid to long-dated bonds is likely to improve. Nonetheless, we maintain our expectations that yields in the fixed-income market are still bound to rise further from current levels.

“Our prognosis is hinged on our expectation of a sustained imbalance in the supply and demand dynamics, more so that the FGN’s 2023FY borrowing needs remain high.”

Meanwhile, the stock market arm the Nigerian Exchange Limited (NGX) yesterday ended its four-day winning streak with a decline of N187 billion on investors’ profit-taking in MTN Nigeria Communications (MTNN) and 23 others.

The NGX All Share Index (ASI) was down by 303.86 basis points or 0.46 per cent to close at 65,687.16 basis points. Also, market capitalisation declined by N187 billion to close at N35.746 trillion.

The downtrend was impacted by losses recorded in medium and large capitalised stocks, amongst which were MTN Nigeria Communications (MTNN), Unilever Nigeria, Cadbury Nigeria, Nigerian Exchange Group and Lafarge Africa.

As measured by market breadth, market sentiment was positive, as 32 stocks gained relative to 24 losers. Courteville Business Solutions, NCR Nigeria and Seplat Energy recorded the highest price gain of 10 per cent each to close at 66 kobo, N3.96 and N1,693.60 respectively, per share. FTN Cocoa Processors followed with a gain of 9.92 per cent to close at N2.66, while Japaul Gold & Ventures and Livestock Feeds rose by 9.90per cent each to close at N1.11 and N2.11 respectively, per share.

On the other hand, Cadbury Nigeria and Unilever Nigeria led the losers’ chart by 10 per cent each to close at N15.30 and N15.75 respectively, while Multiverse Mining and Exploration followed with a decline of 9.97 per cent to close at N2.71, per share.

Omatek Ventures depreciated by 9.62 per cent to close at 47 kobo, while Champion Breweries declined by 7.45 per cent to close at N3.48, per share.

The total volume of trade declined by 9.59 per cent to 500.430 million units, valued at N7.144 billion, and exchanged in 7,345 deals. Transactions in the shares of United Bank for Africa (UBA) topped the activity chart with 58.309 million shares valued at N871.359 million. Access Holdings followed with 55.244 million shares worth N991.195 million, while Universal Insurance traded 32.665 million shares valued at N7.639 million.

FBN Holdings (FBNH) traded 28.026 million shares valued at N590.512 million, while Zenith Bank sold 26.476 million shares worth N933.512 million.