CBN sells N115bn T-bills to strengthen naira – TheNigerialawyer

The Central Bank of Nigeria held an unscheduled Treasury bill
auction on Wednesday, selling a total of N114.6bn ($375m) worth of
treasury bills to strengthen the naira.

This auction is the apex bank’s first since mid-July as it seeks
to boost dollar liquidity in the currency market after the naira
fell, traders told Reuters.

The bank offered to sell N100bn of bills in maturities of three,
six and 12 months but got bids of N454.9bn, with the one-year paper
winning around 80 per cent of the demand.

A trader was quoted by Reuters as saying, “It is a surprise
auction. I do not know why they are floating it without prior
announcement.

“This one-off may not help dollar liquidity unless they become
consistent in the offering.”

Pressure has been building on the naira as oil prices dropped
and foreign investors booked profits on local bonds in response to
falling yields.

The treasury bills secondary market closed on a bearish note
last week largely due to tightened system liquidity (N144bn short
as at Monday).

Sell–off was largely witnessed on the short-term and medium-term
bills, which caused yields to rise by 19 basis points and 11bps
week-on-week, respectively.

On Wednesday, the CBN sold the most-liquid one-year bill at 12
per cent, lower than the 12.25 per cent it paid at its last auction
in July and compared with as high as 18 per cent it fetched a year
ago.

Forex trading was thin on Wednesday as the naira was quoted at
363.50 per dollar on Monday and Tuesday, compared with 362.50 at
the end of last week as foreign investors repatriated funds.

The CBN was conducting regular weekly Open Market Operation
auctions until July when it switched focus to trying to boost
economic output following recession by telling banks to lend more
or face a rise in minimum reserve requirements.

There was no OMO auction by the apex bank last week, despite an
estimated OMO maturity of N88.7bn, Federation Account Allocation
Committee allocation of N360bn and bond coupon payment of
N46bn.

Analysts at Afrinvest Securities Limited had said going into
this week, they expected to see a boost in system liquidity on the
back of OMO maturities worth N108.9bn.

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