By Obinna Chima
The Nigerian Interbank Offered Rates (NIBOR) declined to an average of 12.6 per cent last week, compared with the 14 per cent it was the preceding week as monetary policy measures attracted strengthened liquidity in the system.
The Central Bank of Nigeria (CBN) sold N129.83 billion in treasury bills with maturity ranging from three months to six months at lower yields. Total subscriptions increased to N302.35 billion, compared with N220.88 billion recorded at the last auction, while demand for the 364-day paper was the heaviest, at N137.06 billion.
Similarly, at the Open Market Operations (OMOs) transactions held last week, there was a total inflow of about N92.01 billion into the system. The transactions were traded at a discount rate range of 13.93per cent to 13.99 per cent.
The central bank uses OMO instrument and the treasury bill (TB) auctions to control the short-term interest, manage the volume of money supply in the economy as well as inflation rate.
However, at the 91-day TB auction, a total of N32.06 billion worth of securities was offered, while a total of N39.06 billion was sold to competitive bidders.
A total of N31.31 billion also was sold to non-competitive bidders, bringing total offer and sale to N70.37 billion.
According a report by FSDH Securities Limited, the bill was 177.12 per cent subscribed as N56.78 billion worth of bid was received from competitive bid.
The FSDH report explained: “The bill was issued at a discount rate of 12.75 per cent. A total of N32.06 billion worth of matured bills was repaid into the system, leading to a net outflow of N38.31 billion from this segment of the market. At the 182-day TB auction, a total of N50 billion worth of securities was offered, while a total of N43 billion was sold to competitive bidders.
“A total of N36.11bn was sold to non-competitive bidders, bringing total offer and sale to N79.11bn. The bill was 218.50 per cent subscribed as N109.25 billion worth of bid was received from competitive bidders. The bill was issued at a discount rate of 13.03 per cent. A total of N50 billion worth of matured bills was repaid into the system, leading to a net outflow of N29.11 billion from this segment of the market.”
Also, at the 364-day treasury bills auction, a total of N47.79 billion worth of securities was offered and sold to competitive bidders, while N4.02 million was sold to non-competitive bidders, bringing total offer and sale to N51.81bn. The bill was 286.82 per cent subscribed as N137.06 billion worth of bid was received from competitive bidders. The bill was issued at a discount rate of 13.05 per cent.
At the Wholesale Dutch Auction System (WDAS) held last week, CBN offered a total of $100 million to dealers. The regulator however sold only $79.88 billion, representing 79.88 per cent of the amount supplied to the market.
But the value of the naira was stable against the dollar at the WDAS. However, at the interbank and parallel markets, the naira depreciated against the dollar.
At the interbank market, the naira added 72kobo to close at N157.55/$1 from N156.83/US$1 the preceding week. In the parallel market, the naira also fell by 10 kobo to close at N158.40/$1 from N158.30/$1 the previous week.
Financial market experts last week stressed the importance of long-term financing in Nigeria, saying that the country could not develop without long-term funds. They noted that in addition to ensuring efficient allocation of resources to productive sectors, long-term fund promoted and sustained social safety net, corporate governance and impacts positively on domestic savings and investment. Speaking on
“Importance of Long-term Funds for Economic Development,” the Managing Director/Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, advised public office holders and decision makers not to shy away from borrowing, saying that the country could not develop to the desired level without borrowed funds. According to him, a nation could either save enough money to fund its development or borrow funds needed for development, adding that since Nigeria could not save as much as needed for development purpose; it had to borrow to fund its development projects.
Acquisition of SMEs’ Toxic Assets
The International Finance Corporation (IFC), the private sector arm of the World Bank Group, last week signed an agreement with Kaizen Venture Partners to enable them co -invest about $20 million in the acquisition of distressed assets of Small and Medium Enterprises (SMEs) in Africa. The move was to facilitate the restructuring of SMEs’ debt and enable them operate effectively as a going concern. Both institutions pointed out that the existence of a strong and relevant market for distressed assets was a key contributor to the stability of any economy’s financial system as it would help to absorb non-performing loans, enable new bank lending to continue and otherwise viable businesses to survive.
IFC’s Director for Financial Markets for Africa, Latin America and the Caribbean, Paolo Martelli, declared that the agreement was the first of such transaction for the multilateral institution in Africa.
THISDAY reported last week that ever since the National Council on Privatisation (NCP) unveiled the 14 companies selected as preferred bidders for the generation and distribution companies under the power privatisation programme, banks in the country have been in hot pursuit of the prospective investors to finance the acquisition of the power assets. Investigations had shown that nearly all the banks, led by First Bank of Nigeria Plc (FBN), Zenith Bank Plc, United Bank for Africa Plc (UBA), Fidelity Bank Plc and Skye Bank Plc, have been falling over themselves wooing the bidders and offering them mouth-watering proposals to fund their acquisitions.
Financing of the distributing companies (Discos), THISDAY gathered, was attracting more interest from banks than the power generation companies (Gencos) because of their direct interface with customers and as such, could generate high returns and pose a lower risk to the banks.
EU Economic Agreement
The Manufacturers Association of Nigeria (MAN) last week warned the Federal Government not to follow the road map leading to the signing of the Economic Partnership Agreement (EPA) between the European Union (EU) and the Economic Community of West African States (ECOWAS). MAN also recommended that the entire negotiation process be subjected to a complete review.
President of MAN, Kola Jamodu, said: “In order to positively impact on the Nigerian economy, the EPA should be repositioned to facilitate the resolution of supply-side constraints facing the competitive production of goods and services. The capacities of domestic manufacturing and processing sectors should be strengthened to avoid regression and to give a fillip to the competitiveness of the productive sector.”
Following recent reports of manipulation of the London Interbank Offered Rates (LIBOR) by Barclays Bank in England, the Financial Market Dealers Association (FMDA), last week said it has taken steps to ensure that the Nigerian Interbank Offered Rates (NIBOR) is not abused. President, FMDA, Mr. Akinsowon Dewed, explained: “ What we are doing presently with the NIBOR committee is that we are looking at the process of how NIBOR is determined and see what lessons we can learn from what happened in the UK in terms of how LIBOR is set and how essentially the potential for abuse can be eliminated.”
According to him, there is no evidence of abuse of the NIBOR in Nigeria historically.
“But what we want to do is to learn from what happened in the UK, improve our process of getting the NIBOR rates and use systems more rather than surveying people,” he said.