Nigerian treasury bills oversubscribed by N512.22bn

October 20, 2019
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The Debt Management Office disclosed that N121.88 billion worth of treasury bills, comprising N5.84 billion 91-day, N3.5 billion 182-day and N112.53 billion 374-day tenors, were auctioned on October 16.The auction results showed a subscription level of N634.11 billion, which comprised N9.38 billion for the 91-day tenor, N38.08 billion for the 182-day tenor and N586.63 billion for the 364-day tenor.

A cumulative amount of N121.88 billion was allotted which comprised N5.84 billion for the 91-day tenor, N3.5 billion for the 182-day tenor and N112.53 billion for the 364-day tenor.

Similar to the auction last week, the level of bids on the long tenor instrument were significant, with total subscriptions settling at N1.07 trillion.

Recently,  the Central Bank of Nigeria (CBN) gave banks a directive to cease sales to clients with outstanding loans with any bank, as well as corporates which were benefitting from CBN intervention funds.

On the other hand, market pundits at Cardinal Stone Limited (CSL) believed that the CBN’s decision may be related to the CBN’s recent efforts to promote lending to the real sector by commercial banks.

Recall that the apex bank in July 2019 sent a circular to all deposit money banks (DMBs) mandating that they maintain a minimum Loan to Deposit Ratio (LDR) of 60 per cent by September 2019 subject to a quarterly review.

Barely three months after the first circular, the apex bank raised the bar, mandating banks to now maintain a minimum LDR of 65 per cent by December 2019.

The punitive measure for non-compliance by DMBs is a levy of additional Cash Reserve Requirement (CRR) equal to 50 per cent of the lending shortfall of the target LDR and some banks were debited in September 2019 for failure to meet the 60 per cent minimum.

They said, “While the objective of the CBN is clear in terms of improving the flow of credit to the private sector to stimulate growth, we are concerned that these unorthodox methods being deployed to achieve this aim may have many unintended negative effects. We are also not certain how CBN intends to monitor compliance.”

CSL analysts further noted that the banks will continue to explore other ways of meeting CBN’s requirements without significantly directing loans to the real sector.

“Recently, many banks have begun to show renewed interest in corporate and state government bonds which were previously unattractive to banks considering risk and reward.

“These assets do not qualify as liquid assets and as such are expected to be treated as loans,” they observed.

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