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Government securities record 242% over-subscription*As NNPC withdraws N82 billion

Stories by Babajide Komolafe

Reflecting the surfiet of funds in the money market courtesy of AMCON bonds, government securties recorded 242 per cent over- subscription last week.

Meanwhile, interbank interest rate rose an average of 9.41 per cent from 8.41 per cent last week following withdrawal of N82 billion by Nigeria National Petroleum Corporation (NNPC) on Friday.

Results of trading in government securities also known as treasury bills (TBs) last week showed that the Central Bank of Nigeria (CBN) offered N134 billion worth of securities while investors’ demand, as reflected by total public subscription stood at N458.78 billion.

The CBN offered N39.08 billion worth of 91 days TBs, N45 billion worth of 182 billion TBs and N50 billion worth of 364 days of TBs while public subscription stood at N92.89 billion, N162.05 billion and N197.84 billion respectively.

The over-subscription prompted a decline in returns on government securities, as reflected by the stop rates which declined to 8.44 per cent for 91 days TBs, 9.15 per cent for 182 days TBs and 9.45 per cent for 364 days TBs from 9.4 per cent, 10.3997 per cent and 10.9922 per cent respectively at their previous auctions.

On the other hand, the CBN repaid maturing TBs worth N114.276 billion comprising N39.276 billion 91 days TBs, N45 billion 182 days TBs and N30 billion 364 days TBs. This resulted to net investment of N19.804 billion.

This implies that investors simply reinvested most of the funds received through the matured bills. This, according to money market sources is because there is liquidity in the market courtesy of AMCON bonds, which the banks are using to raise cheap funds from the CBN on repurchase basis.

Interbank ineterest rates rose to an average of 9.41 per cent from 8.41 per cent last week following withdrawal of N82 billion by the Nigeria National Petroleum Corporation (NNPC) on Friday.

The withdrawal caused market liquidity to fall from surplus of N71.7 billion to deficit of N19.4 billion, prompting interest rate to rise.

The secured Open Buy Back (OBB) climbed to 9.0 per cent from 8.0 per cent, 150 basis points above the central bank’s 7.50 per cent benchmark rate and 3.5 percentage points higher than the Standing Deposit Facility (SDF) rate. Overnight placement rose to 9.50 per cent from 8.50 per cent, while call money climbed to 9.75 per cent from 8.75 per cent.

The indicative rates for the Nigeria Interbank Offered Rate (NIBOR) rose in tandem with the short-term market, with 7-day funds climbing to 9.83 per cent from 9.20 per cent last week.

The 30-day fund jumped to 11.29 percent from 10.50 percent, the 60-day closed at 11.70 percent from 11.16 percent, while the 90-day closed at 12.33 percent compared to 11.83 percent last week.

This trend however is expected to change this week when N455.6 billion statutory allocation funds hits the market.


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