FG to repay N340bn worth of Treasury bills
The Federal Government of Nigeria has concluded plans to repay the total sum of N340 billion or $1.1bn worth of treasury bills on Thursday. The government’s move is expected to lower borrowing.
The repayment, which included the N131.4bn worth of treasury bills issued by the Debt Management Office (DMO), with the balance in the open market bills issued by the Central Bank of Nigeria (CBN).
According to the DMO, it will repay treasury bills maturing on Thursday, 14 of December this year and next Thursday, 21 of December with total amount of N198.03bn.
However, yields on treasuries held up across the board at around 10 per cent on Thursday. They fell to seven per cent after the repayment plan was announced this week.
The debt office, also, noted that it sold N108.66bn worth of naira-denominated bonds maturing in 2021 and 2027 at an auction on Wednesday.
While N50bn of 2021 debt at 13.19 per cent was issued, from 14.79 per cent at the previous auction in November, the same tenor bond closed at 13.11 per cent on the secondary market on Wednesday.
A total of 58.66 billion naira worth of the benchmark bond maturing in 2027 was issued at 13.21 per cent, compared with 14.8 per cent in November. The 2027 paper closed at 13.23 per cent on the secondary market on Wednesday.
Meanwhile, the nation’s one-year Treasury bill yield rose to 10 per cent on Wednesday, having dropped to 7 per cent in the previous session after the government said it would repay some outstanding maturities this month.
The government plans to resume auctions in January after paying some N198bn worth of maturities in December, which helped bills recover some ground.
Traders said some foreign investors were booking profits and bidding to repatriate their funds, creating a liquidity squeeze on the currency market.
Treasury bills traded as high as 18 per cent this year.
The sell-off in bills has caused low activity on the investor forex market as foreign players are not bringing in new funds but bidding to buy dollars, while banks are not willing to sell at lower than 360 naira per dollar, traders said.
On Wednesday, the currency market saw two transactions at 314.50 per dollar on the interbank window with commercial banks trading the naira weaker than the central bank’s rate of 306.
Traders said the drop in Treasury bill yields from a high of 18 per cent this year has triggered a switch by local funds to bonds, currently yielding about 13.5 per cent on average, on expectations that interest rates might start to fall next year.
Stories by Motolani Oseni
