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CBN’s treasury bills offer suffers N56.7bn under-subscription

By Emeka Anaeto, Economy Editor

The Central Bank of Nigeria’s treasury instrument suffered huge under-subscription for the first time in recent months, following the lingering liquidity squeeze in the money market.

The apex bank had offered Nigerian Treasury Bills, NTBs, worth N138.2 billion, at a primary market auction mid last week, but following weak subscription, only N81.5 billion was taken up by investing institutions, leaving a significant shortfall of N56.7 billion.

CBN allotted N20.9 billion, N28.2 billion and N32.4 billion of the 91-days, 182-days and 364-days NTBs respectively. The executed deals were at stop rates of 14 per cent, 17.1 per cent and 18.3 per cent respectively.

Banking system liquidity came under severe pressure previous week, following CBN’s move to execute a special secondary market intervention auction of USD313 million worth of two months foreign exchange forwards contract at rates, ranging from N310.00/US$1.00 to N350.00/US$1.00.

This forced banks to provide Naira cover which was far in excess of the required N110 billion, in a bid to secure scarce foreign exchange.

Consequently, severe liquidity squeeze gripped the money market, recording a deficit of N84 billion at market opening last Monday, while forcing interest rates to all time high of 128 per cent at the interbank Over-night funds.

The dollar forwards auction was targeted at clearing backlogs of foreign exchange demands from agriculture and agro-allied businesses, airlines and manufacturers, among others.

However, the refunds for unsuccessful bids at the foreign exchange auction in addition to inflow from maturing Treasury Bills worth N138.2 billion improved system liquidity levels while crashing rates down to 14.5 per cent by weekend.

Moreover, banks’ treasurers are expecting an inflow of about N200 billion from Federation Account Allocation Committee, FAAC, to improve system liquidity and expect money market rates to moderate further down from current levels.

But there was also indication that the CBN will react to this liquidity upsurge by mopping up the expected inflows through the Open Market Operation, OMO, auctions in pursuance of its monetary tightening policy.



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