T-Bills Yield Drops As Naira Advances

Yields on Nigerian Treasury bills declined to the lowest in almost two months as bids for the instrument rose while the naira advanced to its highest level in almost two weeks.

Investors higher than bided three times the N116.18 billion offered by of the Central Bank of Nigeria (CBN) while inflow of funds rallied the naira for a second day as it gained 0.2 per cent to close at 157.42 to the dollar.

The CBN said it sold N30.647 billion of 91-day bills at a yield of 12.40 per cent, the lowest since a September 26 sale. The bank sold N31.246 billion of 182-day debt at 12.45 per cent and N54.29 billion of 364-day securities at 12.50 per cent. Bids totalled 355.9 billion, the highest since October 24.

The apex bank held benchmark interest rate at a record high of 12 per cent to check inflation and stabilise the local currency. Inflation, which accelerated for the first time in four months to 11.7 per cent in October on widespread flooding of farms, is still above the bank’s target of less than 10 per cent.

According to the Chief Executive Officer of the Financial Market Dealers Association, Wale Abe, “subscription is rising due to attractive yield. By holding the interest rate at 12 per cent, investors expect the central bank will borrow at a rate that is at par with the benchmark rate or above it.”

The naira, which was 0.2 per cent stronger at 157.42 a dollar in Lagos, has risen by three per cent this year, making it the second-best performing currency in Africa after the Guinean Franc.

The naira’s appreciation could be traced to tight monetary conditions, improved supply of foreign exchange to the market by oil companies and increased inflows from portfolio investors, CBN Governor Lamido Sanusi after the bank held its benchmark rate at a record-high 12 per cent.