9 June 2012

Nigeria: Investment in Treasury Bills Drops to N821 Billion

The total amount invested in treasury bills fell to N820.74 billion in May, compared with the N1.014 trillion the previous month, a report by the Financial Market Dealers Association (FMDA) has shown.

The FMDA monthly economic and financial market report for May, obtained on its website Friday, showed that at the first and second auctions in the month under review, while the 91-day stop rates climbed from 13.19 per cent to 13.50 per, the 182-day stop rates increased from 13.87 per cent to 14.14 per cent, while the 364 days bills also rose to 14.30 per cent from 13.95 per cent.

It showed that at the Open Operations Market (OMO), which is done periodically to moderate liquidity, the Central Bank of Nigeria (CBN) sold a total of N504.28 billion in the month under review, as against N304.18 billion sold in April, with tenors ranging from 38 days - 139 days.

Total public subscription was also put at N866.02 billion and N973.64 billion in March.

It added: "Yield of the primary market auction rose at the second auction of the month when compared with the first auction owing to the upward movement in inflation rate. In the same vein, CBN allotted N273.39 billion as against the N324.27 billion bills in April 2012. The increased OMO sales recorded was on the back of taming liquidity in the system by the regulator following the twin injection of bonds maturity and FAAC Funds into the market.

"Judging by inflow and outflow dynamics (PMA and OMO combined), the month recorded N525.19 billion as against N539.31 billion in April. The net withdrawal stood at N252.48 billion relative to N89.14 billion recorded the previous month."

It further revealed that the deposit taking and lending rate of Deposit Money Banks (DMBs) still remained constant for savings figures which averaged 2.333 per cent; same rate as the previous month. Other tenured funds ranged between 2.4838 per cent - 8.1604 per cent for 7-day to 364-day money.

For the lending rates, prime structured loan stood at monthly average of 19.9545 per cent to record a change relative to April 2012; while the normal structured loan increased to 21 per cent from 20.8381 per cent recorded in the previous month.

Commenting on the outlook this month, the report said: "inflation rate may further look north due to the proposed increase in electricity tariff as well general increase in the cost of inputs.

"The declining price of oil in the global market, growing inflationary tendencies, unattractive rate of returns in the debt markets and increased demand for imports may put further pressure on the naira."

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