Economy
CBN Ignores DMO, Bars Retail Investors from Treasury Bills
By Dipo Olowookere
The Central Bank of Nigeria (CBN) has reportedly directed banks not to honour bids from retail investors in the country for treasury bills from Friday, November 29, 2019.
This directive is coming despite assurances from the Debt Management Office (DMO) that local investors, both individuals and institutional, would be allowed to buy any of the federal government debt securities.
Some days ago, the apex bank stopped the sale of its OMO bills to local investors, but allowed offshore investors to partake in the purchase of the liquidity management tool.
In the midst of the confusion created by that development, the debt office released a statement, clarifying that local traders were not restricted from buying its debt instruments, which include T-bills, bonds and others.
“Following the circular to all banks referenced FMD/DIR/GEN/OGC/14/009 dated October 23, 2019 issued by the Central Bank of Nigeria (CBN), it has become necessary for the Debt Management Office (DMO) to issue this notice on eligible investors for securities issued by the Federal Government of Nigeria (FGN).
“The general public is hereby advised that Open Market Operation Bills (OMO Bills) are securities issued by the CBN for monetary management purposes. Thus, the circular in question which excluded some investor categories from investing in OMO Bills, is limited to OMO Bills and does not apply to securities issued by the FGN.
“The DMO wishes to assure the general public that there is no restriction on persons who can invest in FGN securities. Thus, all investors, local and foreign, including individuals, co-operative societies, social clubs, town associations, local corporates, fund/asset managers, pension funds, insurance companies, banks and others are eligible to invest in FGN Securities.
“The DMO offers a wide range of FGN securities in various tenors to meet the needs of its growing and diverse investor base.
“The securities whose tenors currently range from 91 days to 30 years are: Nigerian Treasury Bills (NTB), Federal Government of Nigeria Bonds (FGN Bonds), Federal Government of Nigeria Savings Bond (FGNSB), Sukuk and Green Bonds,” the debt office had clarified in a notice issued on October 29, 2019.
But in a report published today (Thursday) by Punch, it was reported that the CBN has ordered banks and other financial institutions to stop the sale of treasury bills to individuals and small firms with effect from November 29.
Quoting a bank official, the report said, “Operators are trying to see if the November 29 deadline given for the implementation by the CBN could be extended, so as to create enough awareness. But there is no move for the reversal of the directive.”
An operator said the inaccessibility of treasury bills might lead to an increase in savings deposits of the banks, attracting interest rates below what the treasury bills offered.
Further quoting another source from the CBN, it was noted that this move was to stop the mop-up of funds from the system through the treasury bills.
“Many people with huge cash prefer to keep their funds idle in treasury bills instead of investing the funds. Some people collect huge severance package, have huge funds but they have refused to invest the money.
“We want these funds to be useful in the economy so that they will be available in the banks and can be invested to create more jobs in the country,” the source reportedly said.
Business Post reports that the next treasury bills sale at the primary market is slated for next Wednesday, November 13, 2019 and going by this new development, retails investors would still be eligible to partake in it as well as the last exercise for this month, which comes up on Wednesday, November 27, 2019.
By Adedapo Adesanya
Energy stocks influenced the 4.76 per cent loss recorded by the NASD Over-the-Counter (OTC) Securities Exchange on Friday, December 5.
The culprits were the duo of 11 Plc and Nipco Plc,with the former shedding N32.17 to end at N291.83 per share compared with the previous day’s N324.00 per share, and the latter down by N21.00 to sell at N195.00 per unit versus the previous session’s N216.00 per unit.
Consequently, the NASD Unlisted Security Index (NSI) slumped by 170.16 points to 3,401.37 points from 3,571.53 points and the market capitalisation lost N101.81 billion to close at N2.035 billion from the N2.136 trillion quoted in the preceding session.
The OTC securities exchange suffered the decline yesterday despite the share prices of three companies closing green.
Central Securities Clearing System (CSCS) Plc was up by N1.80 to close at N39.80 per share compared with Thursday’s price of N38.00 per share, Air Liquide Plc appreciated by N1.09 to N11.99 per unit from N10.90 per unit, and FrieslandCampina Wamco Nigeria Plc grew by 78 Kobo to N56.57 per share from N55.79 per share.
During the session, the volume of transactions rose by 6,885.3 per cent to 18.2 million units from 4.3 million units, the value of transactions ballooned by 10,301.7 per cent to N389.7 million from N347.2 million, but the number of deals declined by 29.7 per cent to 26 deals from 37 deals.
Infrastructure Credit Guarantee Company (InfraCredit) Plc ended the day as the most traded stock by value on a year-to-date basis with 5.8 billion units worth N16.4 billion, followed by Okitipupa Plc with 170.4 million units valued at N8.0 billion, and Air Liquide Plc with 507.5 million units worth N4.2 billion.
InfraCredit Plc also finished the day as the most traded stock by volume on a year-to-date basis with 5.8 billion units transacted for N16.4 billion, followed by Industrial and General Insurance (IGI) Plc with 1.2 billion units sold for N420.2 million, and Impresit Bakolori Plc with 536.9 million units worth N524.9 million.
By Adedapo Adesanya
The Naira depreciated further against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, December 5, as FX demand pressure mounts.
The Nigerian currency lost N2.60 or 0.18 per cent against the greenback to close at N1,450.43/$1 compared with the previous day’s N1,447.83/$1.
Equally, the domestic currency declined against the Pound Sterling in the official forex market during the session by N4.48 to trade at N1,935.45/£1, in contrast to Thursday’s closing price of N1,930.97/£1 and shrank against the Euro by 43 Kobo to end at N1,689.17/€1 versus the preceding session’s rate of N1,688.74/€1.
Similarly, the local currency performed badly against the US Dollar at the GTBank FX counter by N2 to close at N1,455/$1 versus Thursday’s N1,453/$1 but traded flat at the parallel market at N14.65/$1.
As the country gets into the festive period, pressure mounted on the local currency reflecting higher foreign payments and lower FX inflows.
However, there are expectations that the Nigerian currency will be stable, supported by interventions by to the Central Bank of Nigeria (CBN) in the face of steady dollar Demand and inflows from Detty December festivities that will give the Naira a boost after it depreciated mildly last month.
Traders cited by Reuters expect that the Naira will trade within a band of N1,443-N1,450/$1 next week, buoyed by improved FX interventions by the apex bank.
As for the crypto market, it was down yesterday due to profit-taking associated with year-end trading. However, the December 1-Year Consumer Inflation Expectation by the University of Michigan fell to 4.1 per cent from 4.5 per cent previously and 4.5 per cent expected. The 5-Year Consumer Inflation Expectation fell to 3.2 per cent from 3.4 per cent previously and 3.4 per cent expected.
With the dearth of official economic data of late, these private surveys have taken on a new level of significance and the market banks of them to make decisions.
Cardano (ADA) depreciated by 5.7 per cent to $0.4142, Dogecoin (DOGE) slid by 5.1 per cent to $0.1394, Ethereum (ETH) dropped by 3.9 per cent to $3,039.75, Solana (SOL) declined by 3.8 per cent to $133.24, and Litecoin (LTC) fell by 3.7 per cent to $80.59.
Further, Bitcoin (BTC) went down by 2.6 per cent to sell at $89,683.72, Binance Coin (BNB) slumped by 2.2 per cent to $883.59, and Ripple (XRP) shrank by 2.1 per cent to $2.04, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 each.
By Adedapo Adesanya
The oil market was up on Friday on increasing expectations the US Federal Reserve will cut interest rates next week, which could boost economic growth and energy demand.
Brent futures rose by 49 cents or 0.8 per cent to $63.75 per barrel and the US West Texas Intermediate (WTI) futures expanded by 41 cents or 0.7 per cent to $60.08 per barrel.
Investors digested a US inflation report and recalibrated expectations for the Federal Reserve to reduce rates at its December 9-10 meeting.
US consumer spending increased moderately in September after three straight months of solid gains, suggesting a loss of momentum in the economy at the end of the third quarter as a lackluster labor market and the rising cost of living curbed demand.
Traders have been pricing in an 87 per cent chance that the US central bank will lower borrowing costs by 25 basis points next week, according to CME Group’s FedWatch Tool.
Investors also focused on news from Russia and Venezuela to determine whether oil supplies from the two sanctioned members of the Organisation of the Petroleum Exporting Countries and allies (OPEC+) will increase or decrease in the future.
The failure of US talks in Moscow to achieve any significant breakthrough over the war in Ukraine has helped to boost oil prices so far this week.
A loss of Venezuelan oil production in case of a US military intervention will materially impact global benchmark prices as the market will have to replace Venezuela’s heavy crude.
Venezuela is estimated to pump about 1.1 million barrels per day of crude oil at present, so if the US-Venezuela tension escalation into an invasion in the South American country, this volume of crude would be at risk.
Reuters reported that the Group of Seven countries and the European Union are in talks to replace a price cap on Russian oil exports with a full maritime services ban in a bid to reduce the oil revenue that helps finance Russia’s war in Ukraine.
Any deal that could lift sanctions on Russia, the world’s second-biggest crude producer after the US, could increase the amount of oil available to global markets, weakening prices.
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