CBN woos foreign investors with N206 billion debt at higher yields

Plans additional N110b on Wednesday, exchange rates remain unstable over supply shortages

The Central Bank of Nigeria (CBN) has auctioned N206 billion in excess of its planned treasury debts of N50 billion at higher yields, in a bid to attract foreign investors.
The move, which apparently is a part of the apex bank’s strategic plans to rekindle investors’ interest in the economy, would also help mobilise the scarce foreign currency inflow.Besides, with the economy now adjudged to be recessed, the regulator is scripting the monetary policy actions as a fresh boost to its revival and revving up foreign direct investments.

It also plans to raise additional N110 billion in local currency-denominated bonds on Wednesday, even as they continue to seek advisers and book runners to manage a planned $1 billion Eurobond it intends to offer this year. Specifically, the regulator raised raised N256 billion in six-month bill at the weekend, as N206 billion at a higher yield of 18 percent, which is also targeted at reducing the quantity of money in circulation.
Traders, who also pleaded anonymity, said the whole move is aimed at driving the economy with bills and bonds, especially its sustenance at higher yields.CBN, at the last Monetary Policy Committee meeting in Abuja, had increased interest rate to 14 per cent from 12 per cent in an effort to reduce the negative rate of -4.5 per cent to -2.5, as inflation rose sharply to 16.5 per cent.Consequently, the sale of the treasury instrument mopped up the liquidity level, stoking high rates of lending among the Deposit Money Banks.

The Overnight lending rate jumped to 23 percent at the weekend from 10 percent it previously closed, after the treasury bills were offered at higher yields to lure foreign investors.Also, the Open Buy-Back (OBB) surged to 22.5 per cent, up three per cent, against eight per cent on Thursday, on the back of treasury bills’ maturity worth N113.7 billion.

Besides, the banks were paying for treasury bill purchases, as well as the foreign currency purchases made at the interbank market on behalf of their customers, thereby tightening the liquidity level further.In recent times, the CBN has been offering treasury bills at high rates to attract offshore flows into Nigeria, which has been hit hard by oil price volatility in more than 24 months.
Meanwhile, the exchange rates at the interbank market since last week have been marked by huge initial trade loss and huge gain before the end of each day’s trade.At the weekend, with the intervention of undisclosed amount by CBN at the currency market, the local unit, which had hit an all-time low of N353.75, turned to currency appreciation at N310 per dollar.

The liquidity crunch in the foreign exchange market continued last week as the local unit remained under pressure, compared to previous week, when the Naira/Dollar exchange rate was less volatile.At the parallel market, trading at remained high at N395.00/$1 all week except Wednesday and Friday, when it traded at N394.00/$1 and N397.00/$1.
“We believe the exchange rate will remain pressured in the interim until autonomous players return to the market to relieve the CBN of its role of major dollar supplies at the interbank.“We are of the view that the depreciation of the naira, the reforms in the FX market coupled with current attractive yield environment should buoy foreign investor sentiment in Nigerian assets and aid the vital return of foreign capital to the market,” analysts at Afrinvest Securities Limited said.