CBN Governor, Sanusi Lamaido Sanusi

Obinna Chima

Investment in treasury bills fell by 16.7 per cent to N683.67 billion in June as against the N820.74 billion that was recorded in May.
The Financial Market Dealers Association (FMDA) disclosed this in its monthly financial and economic report for June obtained by THISDAY Thursday.

Although the report did not give any reason for the development, analysts attributed it to the slight drop in inflation rate for May released last month low inflation rate is always associated with low interest on treasury bills.

The FMDA report showed that at the first, second and third auction in the month under review, 91 days stop rates attained an average value of 14.08 per cent against the 13.35 per cent it attained last month; the 182 days 15.19 per cent relative to the 14.01 per cent it was in May, while the 364 days bills also got to an average of 15.65 per cent when juxtaposed with 14.12 per cent it was the preceding month.

“Available data revealed that only one Open Market Operations (OMO) auction session was conducted. This was occasioned by prolonged system illiquidity as the Central Bank of Nigeria sold N14.12 billion against the N363 billion sold in May in 62-day Tenor.
“Public subscription was N48.22 billion relative to N956.24 billion in the preceding month. The sharp decline in OMO sales recorded was on the back of reduced injection into the market,” it added.

Commenting on the activities in the forex market in the month under review, it stated that the premium between the CBN official and parallel market widened to 5.8 per cent from 4.01 per cent recorded at the end of May.

It added that “the above premium exceeded the international benchmark of 5 per cent hence the CBN will need to demonstrate the capacity to meet market demand as it becomes expedient, in order to nip further volatility in the bud and to avoid.”

The FMDA however stated that declining oil prices which affects the foreign reserves remains the biggest threat to the economy. According to the association, the behavioural pattern of domestic interest rates in the months ahead is expected to follow last month’s high regime.

“Inflation outlook will still remain challenging for the economy and monetary authorities especially. However, CBN will likely result to increased use of OMO as against upward review of Monetary Policy Rate, as it has proven a lot effective without causing sudden policy disruptions,” it added.