CBN raises N256bn from treasury bills at 18% yield

By Omodele Adigun
In a bid to attract foreign investors to the country, the Central Bank of Nigeria (CBN) has raised N256 billion in six-month treasury bill at a higher yield of 18 per cent yesterday
The amount is about N206 billion above what it had planned to issue and foreign exchange (forex) traders said the development sent the inter-bank overnight lending rate spiralling to 23 per cent, from its
previous level of 10 per cent. The overnight rate is the interest rate at which major financial institutions borrow and lend one-day (or overnight) funds among themselves.
Commercial banks on Friday were paying for treasury bill purchases and a foreign currency intervention, traders said, thereby reducing the amount of naira in the banking system.
The CBN, which has been selling hard currency almost daily, has been offering treasury bills at high rates to attract offshore flows into Nigeria, which has been hit by the fall in oil prices,
prompting foreign players to flee bond and equities markets.
Analysts are of the view that confidence in the country has been punctured which caused the investor apathy and the current forex scarcity.
“Investors, both local and international, complain that we don’t have the reserves to meet all the maturing obligations or all our obligations. So, they are not bringing in their money,” said Mr. Johnson Chukwu, the Managing Director of Cowry Assets Management Ltd.
“The Central Bank is trying to drive the economy with bills and bonds that is they are offering securities at such high yields,” one trader said.
The CBN also intervened on the currency markets after the naira hit an all-time low of N353.75 on the interbank market on Friday.
By close, the naira was trading back at 310. The currency has been hitting new
lows since this week.
Traders say banking system liquidity has been in de it for more than a week as the central bank continues to drain cash to support the currency. But it opened with a credit of N84 billion on Friday due to treasury bill maturities, they said.