CBN plans N229b treasury bills to counter budget disbursements

CBN

The Central Bank of Nigeria (CBN) will offer N229.14 billion in Treasury bills next week in a move to quickly counter the inflation-inducing power of N652.2 billion shared by the three-tier government.
While the monetary policy response is aimed at stabilising price and check speculations at the foreign exchange market, it has become a twice-monthly trend to curb rise in money supply, raise fund for government and help banks manage their liquidity.
According to the apex bank schedule, N29.14 billion will be for 91-day bills; N80 billion will go for 182-day paper; while N120 billion will be allocated to 364-day bill.
CBN’s Economic Report for May showed huge activity in the government’s securities market, as Treasury bills with 91, 182 and 364 days tenors and long-term bonds were issued on behalf of the Debt Management Office (DMO).
Specifically, Treasury bills offered were worth N261.56 billion, while N469.85 billion and N341.56 billion were subscribed and allotted respectively, at the two auctions held in May 2017.
Consequently, general activities in domestic money market were influenced by liquidity condition resulting from provisioning and settlement of foreign exchange purchases, auctioning of the bills and bonds.
As at May 25, 2017, CBN bills worth N562.51 billion were issued at stop rates between 18.00 and 18.60 per cent, representing 115.2 per cent higher than the N261.37 billion sold at similar rates in the preceding month.
But given the resultant reduced quantity of money in circulation, banks sustained access to the Standing Facilities windows of the apex bank to square-up their positions either by borrowing from the CBN or depositing the excess in their reserves at the end of each business day.
A further analysis of the market data, showed that there was more patronage at the CBN’s Standing Lending Facility (SLF) window, compared with the Standing Deposit Facility window (SDF), while rates at both ends remained at 16 per cent and nine per cent, respectively.
On Tuesday, CBN retained these rates, when it left the asymmetric corridor at +200 basis points for on-lending to banks and -500 basis points for deposit by banks, around the benchmark rate at 14.
Total request for SLF granted during the review month was N4.1 trillion, compared with N5.3 trillion in the preceding month, was made up of N1.2 trillion direct lending and N2.8 trillion intra-day lending facility converted to overnight instrument.
Daily lending to banks ranged from N171.62 billion to N345.69 billion, resulting in daily average of N225.03 billion for 18 transaction days, earning N2.81 billion, compared with the total interest of N4.05 billion earned in the preceding month.
On the other hand, total SDF granted during the review period was N467.33 billion with a daily average of N29.21 billion, compared with N369.45 billion in April 2017, while interest rate paid by banks to CBN amounted to N160 million, against N120 million in April 2017.