CBN Raises N177bn Via Treasury Bills At 18.5%
The Central Bank of Nigeria (CBN) yesterday raised N177.22 billion through the sale of a one-year treasury bill with yields matching the inflation rate in the country to lure investors. With inflation figure for December 2016 put at 18.55 per cent, the apex bank sold the one-year bill yielded 18.54 percent, far higher than the central bank’s benchmark interest rate of 14 percent.
Yesterday’s auction was the third this year at which the apex bank has offered the one-year bill at a yield of above 18 percent.
The central bank had previously sold short-term debt at yields below inflation for months.
The sale drew subscriptions of almost four times the amount initially targeted and the issue amount was increased. December’s inflation reading marked the 11th monthly rise in a row and was more than an 11-year high.
As the government increases borrowing to try to spend its way out of the first recession for 25 years in Africa’s biggest economy, Nigeria has been issuing bonds at yields below inflation to try to keep a lid on debt costs. It has been helped by local pension funds that are awash with cash but risk-averse and which can invest more than 80 percent of pension assets in government bonds.
But the lack of a government benchmark that reflects inflation has made it difficult for corporate borrowers to issue debt. The bank raised a total of N302.4 billion at the auction, more than the N242 billion planned due to strong demand for the one-year debt.
It sold a six-month bill at 17.24 percent to raise N80 billion and a three-month note at 13.79 percent to fetch N45.18 billion. The CBN sells treasury bills regularly to raise naira to help the government fund its budget, control the money supply and assist lenders manage their liquidity.
Meanwhile, the naira is expected to remain stable after the CBN released around $660 million to reduce dollar shortages in the country. The naira was quoted at N498 at the parallel market and N399 at the bureau de change market.
“The pressure on the market has reduced slightly because of the recent dollar sales by the central bank to clear part of the backlog of demand and the regular sales to bureaux de change by Travelex,” one trader said.
