Economy

Customers’ Rush for Treasury Bills Worries Banks

Published

8 years ago

10/08/2017

By ThisDay

Nigerian banks are currently finding it extremely difficult to mobilise deposits from institutional investors such as Pension Fund Administrators (PFAs) and insurance companies as well as individuals due to the attractive treasury bills yields.

The increasing awareness of the opportunities in the treasury bills market is seeing a lot of banks lose deposits to fixed income investments.

This is because most investors and bank customers now benchmark interest rates on term deposit against treasury bill rates.

THISDAY findings showed that those affected most are the Tier 2 banks as they are finding it difficult to meet the demand of the fund holders.

But the Tier 1 banks are not under such pressure, THISDAY learnt.

The cash squeeze in the market clearly manifested in the interbank lending rate which increased to 23 percent on Friday from five per cent the preceding Friday.

The Nigerian Treasury Bill currently offers a unique investment opportunity to investors. It offers security and guaranteed premium returns to its investors.

Last week, the 364-day instrument offered by the Central Bank of Nigeria (CBN) recorded excess subscription to the tune of N91.1 billion, whilst the CBN allotted N136.5 billion at a stop rate of 18.5 per cent relative to the offered amount of N120 billion.

The 91-day (offer amount: N29.1 billion; subscription: N26.1 billion) and 182-day (offer amount: N80 billion; subscription: N69.75 billion) instruments were however undersubscribed, whilst the CBN allotted N23.2 billion and N69.57 billion at stop rates of 13.4 per cent and 17.4 per cent respectively.

An analyst at Ecobank, Mr Kunle Ezun, who confirmed the situation in the money market, said the banks are feeling the brunt now.

“A lot of the PFAs, insurance companies and individuals are not willing to do term deposit again. They prefer doing treasury bills.

“If they do term deposit, they get around seven per cent interest. But they can get as high as 18 per cent from treasury bills. A lot of the banks today are losing deposits because of this.

“What the PFAs are saying is that if you cannot match treasury bills, bring back my money. Individuals are also saying: if you can’t give what treasury bills will give me, I am not going to save money with you.

“If banks don’t have deposits, they can’t give loans. The few banks that are ready to match treasury bills rates are doing that at a cost,” Mr Ezun said.

The Chief Finance Officer, Wema Bank Plc, Mr Tunde Mabanwoku, also confirmed the challenge currently faced by the Tier 2 banks.

Mr Mabanwoku explained: “What we see now is that customers are increasingly benchmarking treasury bills rates. So, when customers come in that they want to do fixed deposits and you tell them its 12 per cent, they would be comparing what you tell them with treasury bill rates.

“So, customers are becoming a lot more aware of what is happening out there and they are saying if they can put their money in treasury bills at 17 per cent, why should they put their money in a bank at 12 per cent.

“So, banks have had to increase their cost of deposits just to match or get close to the sovereign rate.”

Also, the Managing Director, Afrinvest Securities Limited, Mr Ayodeji Ebo, disclosed that owing to the opportunities in the treasury bills segment, foreign exchange speculators who had converted their naira to the dollar are now re-converting the greenback, back to naira in order to invest in fixed income securities.

He said those that doubted the ability of the central bank to sustain its intervention are now convinced that the banking sector regulator has enough ammunition to sustain its foray in the market.

He said: “People have been observing the development in the forex market. We have observed for over four months, the CBN has continued to emphasise that they would continue to intervene.

“In addition to that, despite the frequent intervention by the CBN, the reserves have also not been depleting. So, that has boosted confidence.

“Also, if you look at the volume of transactions in the investors and exporters’ window, that has also increased and we have seen banks now re-introduce their naira cards for dollar transactions.

“So, those people that were trying to take arbitrage opportunities, especially those that entered when the dollar was as low as N400-N500, are trying to cut their losses by investing in risk-free investments like treasury bills. Luckily for them, the interest rate is also very high.”

Nigeria’s external reserves stood at $30.927 billion as at August 3.

ThisDay

Economy

Food Concepts Return NASD OTC Exchange to Danger Zone

Published

10 hours ago

05/12/2025

Adedapo Adesanya

By Adedapo Adesanya

Food Concepts Plc neutralized the gains recorded by three securities, returning the NASD Over-the-Counter (OTC) Securities Exchange into the negative territory with a 0.27 per cent loss on Thursday, December 4.

Yesterday, the share price of the parent company of Chicken Republic and PieXpress declined by 34 Kobo to sell at N3.15 per unit compared with the previous day’s N3.49 per unit.

This shrank the market capitalisation of the OTC bourse by N5.72 billion to N2.136 billion from N2.142 trillion and weakened the NASD Unlisted Security Index (NSI) by 9.57 points to 3,571.53 points from 3,581.10 points.

Business Post reports that Central Securities Clearing System (CSCS) Plc went down by 50 Kobo to N38.50 per share from N38.00 per share, FrieslandCampina Wamco Nigeria Plc gained 29 Kobo to sell at N55.79 per unit versus N55.50 per unit, and Geo-Fluids Plc added 5 Kobo to close at N4.60 per share compared with Wednesday’s closing price of N4.55 per share.

Trading data indicated that the volume of securities recorded at the session surged by 6,885.3 per cent to 4.3 million units from the 61,570 units posted a day earlier, the value of securities increased by 10,301.7 per cent to N947.2 million from N3.3 million, and the number of deals went up by 146.7 per cent to 37 deals from the 15 deals achieved in the previous trading session.

At the close of business, Infrastructure Credit Guarantee Company (InfraCredit) Plc was the most traded stock by value on a year-to-date basis with the sale of 5.8 billion units for N16.4 billion, trailed by Okitipupa Plc with 170.4 million units worth N8.0 billion, and Air Liquide Plc with 507.5 million units valued at N4.2 billion.

InfraCredit Plc also finished the session 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 traded for N524.9 million.

Economy

Investors Gain N97bn from Local Equity Market

Published

10 hours ago

05/12/2025

Dipo Olowookere

By Dipo Olowookere

The upward trend witnessed at the Nigerian Exchange (NGX) Limited in recent sessions continued on Thursday as it further improved by 0.10 per cent.

This was despite investor sentiment turning bearish after the local equity market ended with 23 price gainers and 28 price gainers, indicating a negative market breadth index.

UAC Nigeria gained 10.00 per cent to finish at N88.00, Morison Industries appreciated by 9.94 per cent to N3.54, Ecobank rose by 8.53 per cent to N36.90, and Coronation Insurance grew by 8.47 per cent to N2.56.

On the flip side, Ellah Lakes depreciated by 10.00 per cent to N13.14, Eunisell Nigeria also shed 10.00 per cent to finish at N72.90, Transcorp Hotels slipped by 9.95 per cent to N157.50, Omatek shrank by 9.23 per cent to N1.18, and Guinea Insurance dipped by 8.46 per cent to N1.19.

Yesterday, the All-Share Index (ASI) went up by 152.28 points to 145,476.15 points from 145,323.87 points and the market capitalisation chalked up N97 billion to finish at N92.726 trillion compared with the previous day’s N92.629 trillion.

Customs Street was bubbling with activities on Thursday, though the trading volume and value slightly went down, according to data.

A total of 1.9 billion stocks worth N19.2 billion exchanged hands in 23,369 deals during the session versus the N2.3 billion valued at N21.0 billion traded in 21,513 deals a day earlier.

This showed that the number of deals increased by 8.63 per cent, the volume of transactions depleted by 17.39 per cent, and the value of trades decreased by 8.57 per cent.

For another trading day, eTranzact led the activity chart with 1.6 billion units sold for N6.4 billion, Fidelity Bank traded 31.0 million units worth N589.3 million, GTCO exchanged 28.3 million units valued at N2.5 billion, Zenith Bank transacted 27.1 million units for N1.6 billion, and Ecobank traded 21.9 million units worth N744.3 million.

Economy

Naira Loses 18 Kobo Against Dollar at Official Market, N5 at Black Market

Published

10 hours ago

05/12/2025

Adedapo Adesanya

By Adedapo Adesanya

The Naira marginally depreciated against the United States Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEM) on Thursday, December 4 amid renewed forex pressure associated with December.

At the official market yesterday, the Nigerian currency lost 0.01 per cent or 18 Kobo against the Dollar to close at N1,447.83/$1 compared with the previous day’s N1,447.65/$1.

It was not a different scenario with the local currency in the same market segment against the Pound Sterling as it further shed N15.43 to sell for N1,930.97/£1 versus Wednesday’s closing price of N1,925.08/£1 and declined against the Euro by 20 Kobo to finish at N1,688.74/€1 compared with the preceding session’s N1,688.54/€1.

Similarly, the Nigerian Naira lost N5 against the greenback in the black market to quote at N1,465/$1 compared with the previous day’s value of N1,460/$1 but closed flat against the Dollar at the GTBank FX counter at N1,453/$1.

Fluctuations in trading range is expected to continue during the festive season as traders expect the Nigerian currency to be stable, supported by intervention s by to the Central Bank of Nigeria (CBN)in the face of steady dollar demand.

Support is also expected in coming weeks as seasonal activities, particularly the stylised “Detty December” festivities, will see inflows that will give the Naira a boost after it depreciated mildly last month, according to a new report.

“As the festive Detty December season intensifies, inbound travel, tourism spending, and diaspora inflows are expected to provide moderate support for FX liquidity,” analysts at the research unit of FMDA said in its latest monthly report for November.

Traders cited by Reuters expect that the Naira will trade within a band of N1,443-N1,450 next week, buoyed by improved FX interventions by the apex bank.

Meanwhile, the crypto market was down as the US Federal Reserve’s preferred inflation gauge, core PCE, likely rose in September—moving in the wrong direction. However, volatility indices show no signs of major turbulence.

If the actual figure matches estimates, it would mark 55 straight months of inflation above the US central bank’s 2 per cent target. The sticky inflation would strengthen the hawkish policymakers, who are in favour of slower rate cuts.

Ripple (XRP) depreciated by 4.5 per cent to $2.08, Solana (SOL) went down by 3.8 per cent to $138.11, Litecoin (LTC) shrank by 3.1 per cent to $83.23, Dogecoin (DOGE) slid by 2.5 per cent to $0.1463, Cardano (ADA) declined by 2.1 per cent to $0.4368, Bitcoin (BTC) fell by 0.9 per cent to $91,975.45, Binance Coin (BNB) crumbled by 0.9 per cent to $899.41, and Ethereum (ETH) dropped by 0.7 per cent to $3,156.44, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) closed flat at $1.00 apiece.