CBN mops up N100.22bn in February

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CBN mops up N100.22bn in February

... DMO mobilises N75bn through FGN bondsThe Central Bank of Nigeria (CBN) mopped up N100.22 billion from the system, last month, through treasury bills to complement the Domestic Debt Office (DMO) in the primary market auction.  This is sequel to the much liquidity that was injected into the market through the $2.0 billion excess crude funds and the N329 billion allocations that were shared in the month of February by the three tiers of government.This is partly responsible for the little or no credit to the real economy which the banks perceived to be too risky. The result is that most of the banks have over the months taken their funds to safe havens like the Federal Government of Nigeria (FGN) bond and treasury bills even when the returns are low.  The CBN mobilised N100.22 billion against N149.83 billion in the month of January to complement the DMO's effort in the primary market auction. At the two auctions held in the month, subscriptions from the market level were consistently higher than the amount on offer, even in the face of lower discounted rates.  The 91 days and 182 days bills that were offered at the first auction at 2.645 percent and 4.23 percent, respectively, were offered at the second auction in the month for 2.02 percent and 2.44 percent, respectively. This could be tied to the liquidity status of the market. The marginal rates on the government securities for the month on the average was 2.332 percent for 91 days issue, 3.335 percent for 182 days, and 4.55 percent for 364 days.The treasury bills are used to regulate the amount of liquidity in the system by the apex bank. When liquidity is too much it sells treasury bills at discounted rates. From the data available at the time of this report, the month recorded a net inflow of N15.00 billion as against the net outflow of N9.83 billion recorded in January. This was further broken down to a total inflow of N115.76 billion against N70.00 billion in January 2010, and total outflow of N100.22 billion against N79.83 billion recorded in the previous month. Further breakdown also revealed repayment through the PMA market of N95.21 billion and N20.55 billion through the Open Market Operation window. There was no underwritten of bills in the month, in line with prevailing expansionary monetary policy of the Central Bank of Nigeria (CBN). With a new issue in the month, the Debt Management Office mobilised N75.00 billion through competitive bid. The new issue of a 3-year bond of N20.00 billion attracted a public subscription of N78.03 billion.Allotments among 34 successful bids were done at marginal rate of 5.50 percent. The re-opening of a 10-year FGN bond of N25.00 billion attracted public subscription of N53.20 billion. Allotment among 37 successful bids was at a stop rate of 7.15 percent. For the re-opened 20-year bond of N30.00 billion, the public subscription was N66.05 billion, and allotment of issue was at stop rate of 8.02 percent. However, DMO maintained the original coupon rates of 7.00 percent for the 10-year and 8.50 percent for the 20-year while the coupon rate for the new issue of 3-year bond was set at 5.50 percent. The demand pressure that characterised the Bond OTC market year to date was sustained, driven prices upwards and yields downwards in the face of strong market liquidity position. There were transactions across all maturities. However, the short tenor bond experienced high volatility when compared with the longer tenor.

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