FG paying high interest rates to clear excess money in circulation

Indications emerged last week that the Federal Government (FG) through the Central Bank of Nigeria (CBN) and the Debt Management Office (DMO)  have in an aggressively move to mop up excess liquidity have been paying investors  high rates.

At the last Treasury –bills (T-bills) auction held on Wednesday, the 364-day T-bill was issued at 16.5 per cent, a 7.2 per cent hike from the 9.3 per cent in January dealers said. Same as the OMO auction held the following day where the 364-day tenured OMO bills were issued at 17.0 per cent marginal rate from 13.5 per cent the previous month.

Dealers said sales at both auctions were significantly higher than the offered amounts.

Cowry Assets Management Limited in a note to investors disclosed  that the Central Bank of Nigeria auctioned treasury bills worth N127.96 billion, viz: 91-day bills worth N36.78 billion;182-day bills worth N39.17 billion; and 364-Day bills worth N52 billion on Wednesday, July 20, even as  an additional N75.54billion in 357 day bills were sold via Open Market Operations.

“The out flows exceeded matured bills worth N259.47 billion, viz: 91-day billsworthN36.78 billion; 182-day bills worth N39.17 billion; 364-day bills worth N52 billion and174-day bills worth N131.52 billion. Consequently, NIBOR for 1month, three months and six months rose to 17.99 per cent (from 15.30 per cent), 19.28 per cent (from 16.60 per cent) and 21.19 per cent (from 17.96 per cent) respectively.

“Meanwhile, FAAC disbursed N538.79 billion for the month of June (a126.89 per cent month-on-month increaseoverN237.47 billion for May) on Thursday, July 21. This week, we expect stability in interbank interest rates as a result of the impact of recent FAAC disbursements,” the dealers at Cowry Assets Management sated.