Naira Drops As CBN Issues Treasury Bills

The naira depreciated for the third time in four days after the Central Bank of Nigeria (CBN) paid out maturing treasury bills, boosting money supply and freeing up local currency for buyers to seek dollars.

The currency declined 0.1 per cent to N157.85 per dollar in Lagos on Friday, paring a weekly gain to 0.1 per cent, according to data compiled by Bloomberg.

The CBN settled maturing bills amounting to N263.93bn ($1.7bn) on Thursday, the Financial Markets Dealers Association, said on its website.

The institution sells bills to help manage currency supply within the market.

An analyst at Sterling Capital Limited, Mr. Sewa Wusu, said, “The maturities boosted money supply as they hit the market, making dealers more able to seek dollars.”

The regulator held the benchmark interest rate at a record high 12 per cent for an eighth time on January 21 to control inflation and stabilise the naira. The nation’s inflation rate fell to nine per cent in January from 12 per cent in December.

Yields on Nigeria’s $500m of Eurobonds due January 2021 fell 20 basis points to 4.08 per cent.

The yield on the country’s 16.39 per cent domestic bonds due January 2022 rose 24 basis points to 11.1 per cent.

Meanwhile, the CBN has sold N190bn in treasury bills with maturities ranging from three months to one year.

The sale, according to Reuters, is about N40bn more than what the regulator initially offered at the week’s auction.

Yields on the 91-day and 182-day notes were broadly unchanged while the returns on 364-day paper edged up marginally compared with the previous auction on February 20. The bank sold N32.97bn in 91-day paper at 9.2 per cent, same as at the previous auction on February 20, N40bn in the 182-day bill at 9.44 per cent, compared with 9.45 per cent at the previous auction.

A total of N117.12bn of the 364-day bond was sold at 9.98 per cent, higher than the 9.45 per cent at the previous auction on February 20.

Nigeria had originally planned to sell N50bn in 182-day notes and N67.12bn in 364-day paper at the auction. Total demand stood at N266.11bn compared with N529.91bn sold at the previous auction, with demand for the one year paper the heaviest. Offshore investors’ interest in local debt has surged since its inclusion by JP Morgan in its emerging market government bond index last October. Barclays will add Nigerian debt to its index from this month. The Federal Government, through the CBN, issues treasury bills regularly to reduce money supply, curb inflation and help lenders manage their liquidity.