With the recent downward movement in oil prices resulting in a decline in the nation’s external reserves and triggering concerns over naira stability, the Central Bank of Nigeria (CBN) auctioned a total of N299billion worth of Treasury Bills between August 7 and 15, to lure foreign inflows, findings by New Telegraph show.
According to traders, the recent drop in oil prices, coupled with falling yields, led foreign investors to booking profits on local bonds, thereby putting pressure on the naira at the Investors and Exporters’ (I&E) foreign exchange window.
The CBN responded to the development by holding an unscheduled Treasury bill auction on August 7, during which it sold a total of N114.6billion worth of T-bills.
The auction was the apex bank’s first T-Bills sale since mid-July and it saw the CBN offering to sell N100billion of bills in maturities of three, six and 12 months, but getting bids of N454.9billion, with the one-year paper winning around 80 per cent of the demand.
Specifically, the CBN sold the most-liquid one-year bill at 12 per cent, lower than the 12.25 per cent it paid at its last auction in July and compared with as high as 18 per cent it fetched a year ago.
The CBN followed up this auction with another after the Sallah break on August 14, during which it sold N34.4 billion worth of bills.
On the 91 day bill, N4.38billion was offered at 9.70 per cent. A total subscription of N15.06billion was recorded while N4.38billion worth of bills was sold.
Also, the N10billion 182-day tenor bill, which was offered at 11.35 per cent, recorded a total subscription of N8.59billion while N3billion was sold.
A total of N27billion was recorded from the sale of the N20billion 364-day bill, which was offered at 12 per cent up from 11.2 per cent it paid at its last sale and recording a total subscription of 122.88billion.
In addition, the CBN auctioned another N150billion open market bills last Thursday, a sale that clearly showed that the regulator was trying to lure foreign inflows as traders said it had told them to increase their rates from last auction rates.
Interestingly, the T-Bills auctions in the last week took place amid ongoing moves by the regulator to limit commercial banks’ investment in treasury bills and Federal Government bonds and get the lenders to increase lending to the real sector of the economy.
Last month, for instance, the apex bank first announced that all deposit money banks would be required to maintain a minimum Loan to Deposit Ratio (LDR) of 60 per cent by September 30, 2019, subject to quarterly review.
It stated that this was meant to encourage lending to Small and Medium Enterprises (SMEs), retail and mortgage customers which shall be assigned a weight of 150 per cent in computing the stipulated LDR.
The regulator emphasised that any DMB’s failure to meet the new minimum LDR by the specified date would result in a levy of additional Cash Reserve Ratio (CRR) equal to 50 per cent of the lending shortfall of the target LDR.
A few days later, the CBN tweaked the guidelines on DMBs’ access to Standing Deposit Facility (SDF), capping the remunerable daily placements by lenders at the SDF window at N2 billion (down from N7.5 billion).
It stated that while the N2 billion would be remunerated at the interest rate prescribed by the Monetary Policy Committee (MPC) from time to time, any deposit by a bank in excess of the N2 billion will not be remunerated.
Clearly, however, with falling oil prices and foreign investors taking profits, the CBN’s unending battle to ensure naira stability is again on the front
Although the naira continues to remain stable at the parallel market, exchanging at N360 to the dollar, the same rate it had largely traded at over the last 12 months, the local currency is currently under pressure at the I&E foreign exchange window.
Last Friday, at the window, the naira eased to 364 per dollar, from a quote of 363.50 amid thin liquidity.
In a recent note, analysts at Financial Derivatives Company (FDC) Limited predicted that the decline in oil prices would eventually lead to a depreciation of the naira.
It would be recalled that the CBN in its third quarter 2019 Nigerian Treasury bills issue calendar, stated that it hoped to raise the total sum of N809.37billion through new issues of Treasury bills from June 13 to August 29, 2019.
The data showed that the CBN would sell N90.62billion worth of three-month bills, N188.04billion of six-month bills and N530.71billion of one-year bills.
As part of its mandate to raise funds for the Federal Government, the CBN sells treasury bills twice a month. The regulator also regularly issues T-bills as part of monetary control measures to mop up excess liquidity and control the money supply.
Findings by New Telegraph indicate that the CBN had planned to raise a total of N1.006trillion and N823.43 billion from treasury bills sales in the second and first quarters of 2019 respectively.