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Wednesday, September 28, 2022

Nigeria’s central bank debuts with N4.1 trln 81-day Special Bills at 0.5%

*Correction: Change the headline to reflect N4.1 trillion instead of N4.1 bln

The Central Bank of Nigeria (CBN) on Thursday debut with its Special Bill with the sales of N4.1 trillion in 81-day tenor paper at 0.5 percent yield, according to fixed income dealers.

Last week, the CBN had announced the introduction of the 90-day tenor Special Bills as part of the measures Cash Reserves Requirements (CRR).

Though banks and other investors were disappointed about the yield on the special bills, some considered it better than the zero-coupon on the CRR money sterile in the CBN vaults.

Yields on the 91-day Treasury bills at this week’s auction was 0.01 percent while the 6-month paper to 0.60 percent.

The CBN sold the one-year Treasury Bill at Wednesday’s auction at 3.20 percent, an increased from 0.15 percent at the previous auction two weeks ago.

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Though some analysts believed the yield on the Special Bill was lower than expected and maybe unattractive to institutional investors, comparatively the yield on the paper was closer to the 0.60 percent offered on the 182-day Treasury at this week’s auction.

Nigeria’s central bank introduced the bills to better manage liquidity while increasing the amount of capital deposit-taking institutions can use to extend credit to critical sectors.

The regulator said last week that the new fixed income assets was part of its efforts to deepen the financial markets and avail the monetary authority with an additional liquidity management tool.

This measure, combined with other monetary policy tools, is expected to help Africa’s biggest oil producer exit its second recession in four years by early 2021, according to Governor Godwin Emefiele.

Nigeria 12-month treasury bills rate jumps to highest in over three months
The frequency of auctions will depend on how much surplus cash banks are generating, Adeyi said.

Government bonds secondary market closed on a negative note on Friday, as the average bond yield across the curve cleared higher by 9 bps to close at 2.08 percent from 1.99 percent on the previous day.

“Average yields across short tenor, medium tenor, and long tenor of the curve widened by 1 basis point, 11 bps and 68 bps, respectively.

“The 23-FEB-2028 maturity bond was the best performer with a decline in yield of 21 bps, while the 18-MAR-2036 maturity bond was the worst performer with an increase in yield of 121 bps, FSDH Capital wrote on note to clients on Friday.

The results of the bond sales at next week’s auction will set a new tone for the fixed-income market.

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