FG raises N83b via one-year TB, offers 18.6% interest

The federal government through its Central Bank on Thursday raised a total of N83.16 billion from the sale of one-year Treasury Bill (TB) notes at 18.69 percent.

The new rate offered showed an increase of 0.91 percent above the February inflation rate of 17.78 percent, which was believed to be in a bid to maintain positive yield and attract investors.

Industry analysts have posited that the move was to bridge the nation’s budget deficit of 2.36 trillion naira in 2017, half of which it aims to fund through domestic borrowing. The FG has been trying to keep costs down as it grapples with the country’s first recession in 25 years amid galloping inflation.

The central bank, however, said it raised N83.16 billion by issuing the one-year bill, which it had sold at a yield of 18.55 percent at its previous auction on March 15.

But the nation’s annual inflation fell for the first time in 15 months to 17.78 percent in February but remained outside the central bank single-digit target.

It raised a total of 134.96 billion naira from a Treasury bill auction on Wednesday.

Outstanding total debt rose to 17.4 trillion naira last year from 12.6 trillion in 2015 and is set to increase further. The government plans to increase public spending by almost 20 percent this year, to be funded through borrowing.

The central bank issues treasury bills twice a month to finance the government’s budget deficit and help lenders manage liquidity and curb inflation.

Similarly, the Debt Management Office (DMO) on Thursday, also raised N2.07 billion ($6.6 million) from a new two-year savings bond intended for retail investors.

Nigeria forecasts a budget deficit of 2.36 trillion naira in 2017, half of which it aims to fund through domestic borrowing.

The debt office noted that it offered the bond to help broaden the country’s funding base. It will be available for purchase on a monthly basis and have a maximum subscription of 50 million naira. It carries a coupon of 13.01 percent.

The March auction attracted subscription from over 2,500 applicants during the five-day sale period, the DMO said, adding that the next sale will be on April 3.

The government plans to increase public spending by almost 20 percent this year and has obtained parliament’s approval for a $500 million Eurobond, after raising $1 billion from international debt market last month.

Outstanding total debt rose to 17.4 trillion naira last year from 12.6 trillion naira in 2015 and is set to increase further, as Africa’s biggest economy grapples with its first recession in a quarter of a century, caused by low oil prices.