Investors Swoop on Treasury Bills, FGN Bonds as Political Uncertainty Ends

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Obinna Chima

Following the successful completion of the general election, which has since seen the deceleration of political risks in the country, portfolio investors are presently taking advantage of Nigeria’s attractive fixed income instruments.

The Central Bank of Nigeria (CBN) last week held its first Primary Market Auction (PMA) for the month of March.
The auction was for instruments across three tenors (91-day, 182-day, and 364-day). It also held an open market operation (OMO) auction for only the 91-day tenor during the week.

For the treasury bills’ PMA, a report by analysts at Afrinvest Securities Limited, disclosed that investor interest was upbeat as all tenors were oversubscribed with bids-offers settling at 2.87 times, 3.32 times and 7.67 times for the 91-day; 182-day and 364-day instruments.

Also, a separate report by analysts at Cowry Assets Management Limited, showed that there was demand pressure from foreign portfolio investors in the market.
Similarly, in the bond market, the average ask-yield on Sovereign naira bonds pared further in the week as it declined by six basis points to settle at 14.3 per cent, as investors continued to take position in attractively priced instruments.

Speaking in a telephone chat with THISDAY, a trader with Ecobank Nigeria, Mr. Kunle Ezun, explained: “Before the elections were even concluded, some foreign investors had started taking position in the market already.
“A lot of them came in and were betting on Nigeria’s instruments and those of them that came in to buy one-year bills at 15 per cent, already made a lot of money.

“A lot of those foreign investors priced in political uncertainty into whatever decision they were taking at that time. They had liquidity and they were bold to take the risks.”

According to Ezun, “the kind of returns you get in Nigeria, you can’t get it anywhere else in the world.
“We have yields at about 16 per cent, an exchange rate that has remained stable and inflation rate that is trending downward.
“So, what else do you need than to take a bet? With the re-election of President Muhammadu Buhari, what investors expect to see is stability, which is what any investor wants.

“They need an environment that is stable, so that they can ride on the yield curve,” Ezun added.
Continuing, analysts at Afrinvest stated: “Next week, we expect system liquidity to be lifted by the impact of maturities worth N169.4 billion expected on the 21st of March. “Consequently, we expect the CBN to hold OMO auction, in line with trend, to keep system liquidity in check.

“The direction of activities in the secondary market last week was in line with our expectations for the market over the near-term.
“We expect that yields would decline as position taking from investors intensify in the face of attractive yields and the depressed equities market.”

The Debt Management Office (DMO) is scheduled to hold the last primary market auction for the first quarter on March 27, 2019, when the FGN APR 2023 and FGN FEB 2028 instruments would be auctioned through re-openings.

Meanwhile, findings by THISDAY showed that the central bank has minimised the amount of its liquidity mop up in the money market as concerns of inflationary pressure continues to ease as well as with the elections over.
The CBN had between December last year and February this year, increased its frequency of OMO so as to mop up the excess liquidity in the market.

The Consumer Price Index (CPI), which measures inflation, further decreased to 11.31 per cent (year-on-year) in February compared to 11.37 per cent in January, according to the National Bureau of Statistics (NBS). nty Ends