The Federal Government of Nigeria (FG) through the central bank ,has concluded all plans to raise a total sum of N62.43 billion ($171m) through an auction of Treasury bills next Wednesday, 16 August 2017.
The nation’s apex bank explained that it plans to offer N32.43 billion in three-month paper and N30b on a six-month bill, while the results of the auction will be announced the same day, as allotment letters would be issued for successful bids on Thursday, 17 August, 2017.
The bank, in a statement, said all money market dealers should submit bids through the CBN S4 WEB INTERFACE between 9:00 am and 11:00 am next Wednesday, 16 August.
The CBN says each bid must be in multiple of N1,000 subject to a minimum of N50,001,000 and authorized money market dealers are to submit multiple bids.
Treasury bills are short term debt instruments used to provide short-term funding for the government and control money supply in the economy.
Consequently, financial experts have raised concerns over the continuous sales of T bills at yields higher than the country’s inflation rate, they believed the CBN will pay between 13.42-18.54 per cent as a strategy to lure yield-hungry investors and attract dollar inflows.
However, the sales of six and 12-month Treasuries to the tune of N204.96b ($650.67m) in bills, on 19th July 2017, was evident of the experts’ claims, as latest annual inflation rate had eased to 16.1 per cent.
Traders have suggested that the sale of Treasury bills left some banks short of cash, forcing them to scramble for funds to pay for their T/bills and dollar purchases from the interbank market; regrettably, that reaction inadvertently pushed up the cost of borrowing amongst lenders.
According to renowned economist and Lagos-based industrialist, Henry Olujimi Boyo, “Ironically, despite the clearly shylock interest rates, inappropriately attached to these risk free government loans, the borrowed funds will be inexplicably simply sterilized from use by CBN, so that the system’s perceived, excess money supply, will not increase the already pervasive, oppressive social pain of inflation, beyond the reported horrors, of the still largely remote impact of terrorism on Nigerians.
He added that these humongous CBN loans, exclude the strident, and regular incursions of the Debt Management Office (DMO) when it also borrows, for longer tenors, at equally disturbing rates of interest, to fund the projected, domestic component of the 2017, N2.85tn budget deficit; it is disturbing that a portion of these expensive debt, will simply be applied to plain consumption expenditure.