ATTRACTED by the high-interest regime in the money market, foreign investors bought N557 billion worth of treasury bills, TBs, in 2016.
This was however 2.4 percent lower than N571.59 billion invested in treasury bills in 2015.
According to the quarterly capital importation of the National Bureau of Statistics, foreign portfolio investment in treasury bills in 2016 remained relatively stable when compared to foreign portfolio investment in equities and bonds in 2016.
According to the NBS, foreign portfolio investment in equities and bonds dropped respectively by 442 percent and 49 percent between 2015 and 2016.
While foreign portfolio investment in equities dropped to N859 billion from N4.66 trillion in 2015, for bonds, it dropped to N395.9 billion from N776.28 billion in 2015.
Research analyst at Ecobank, Mr. Kunle Ezun attributed the relative stability of foreign portfolio investment in treasury bills to their attractive yields.
He said most investors actually moved their investment from equities to treasury bills last year because they offered more returns, adding that, the fear of inflation and further Naira depreciation is less pronounced.
The Central Bank of Nigeria (CBN) has continuously stressed the need to attract foreign investors into the nation’s economy have been one of the reasons for maintaining the Monetary Policy Rate (MPR) at 14 percent.
Speaking at the end of the January meeting of the Monetary Policy Committee (MPC), CBN, Governor, Mr. Godwin Emefiele said that a rate cut, “increase inflationary pressure which will make the economy unattractive for foreign and domestic investment.
Investors demand N994bn TBs Patronage for TBs recorded 198 per cent oversubscription last week, as investors demanded N994 billion as against N332.4 billion TBs offered by the CBN.
Review of treasury bills trading shows that the CBN sold N694 billion, comprising N302.4 billion worth of primary market bills and N391.6 billion worth of secondary market bills at an average interest rate of 17.24 percent.
At the primary market, where fresh bills are sold, the CBN offered 45.18 billion worth of 91 days bills, total public subscription stood at N69.4 billion while the apex bank sold N45.2 billion at an interest rate of 13.79 percent. Total public subscription to the N80 billion worth 182 days bills stood at N85.4 billion, while the apex bank sold N80 billion at 17.25 percent. Total public subscription to the N117.2 billion worth of 364 days bills on offer stood at N447.34 billion while the apex bank sold N302.4 billion at 18.54 percent.
At the secondary market where existing bills are resold (Open Market Operations, OMO), the CBN offered N30 billion worth of 181 days bills, total public subscription stood at N82.6 billion while the apex bank sold N82.6 billion at 18 percent. The apex bank also offered N60 billion worth of 342 days bills, with total public subscription at N309 billion while the amount sold was N309 billion at 18.6 per cent.
The huge outflow into treasury bills however triggered scarcity of funds in the interbank money market, prompting cost of funds to rise by over hundred percent. According to data by the Financial Market Dealers Quote (FMDQ), the interest rate on Overnight lending rose and Securitised lending rose to 10.5 percent and 11.25 percent respectively at the close of business on Friday from 5.0 percent and 5.75 percent at the beginning of the week.
This trend is expected to continue this week due to the absence of any major inflow into the money market. “This week, we anticipate an increase in interbank lending rates in the absence of major financial system inflow”, analysts at Cowry Asset Management Limited stated.
Rewane predicts N520/$ parallel market exchange rate
Meanwhile, Managing Director/Chief Executive, Financial Derivatives Company, Mr. Bismarck Rewane has predicted the Naira will further depreciate to N520 per dollar in the parallel market. He made this prediction as part of his outlooks for February while speaking at the monthly Lagos Business School (LBS) Executive Breakfast session held last week.
Parallel market segment
“The Naira will slip to N520 in the market. Attempts to use forwards to stabilize the market will be futile. The Forex market is polluted and needs sanitization”, he said.
However, the Naira was stable against the dollar in the interbank and parallel market segment last week. While the parallel market exchange rate remained stable at N498 per dollar, interbank market spot rate, One month, Three months, six months, and 12 months contracts remained stable at N305.25, N315.34, N323.27, N331.53 and N349 per dollar. Analysts at Cowry Assets, however, predicted that this stability might not be sustained this week.
The relative stability of the naira against the dollar in the last two weeks was driven by increased confidence prompted by the sustained increase in the nation’s foreign reserves. Data by the CBN revealed that the reserves rose further by $130 million to $28.28 billion last week. Cumulatively, the reserves have risen by $2.44 billion.
FCMB, Forte Oil boost corporate bonds by N14bn
The corporate bonds market received a fresh breath of life last week as FCMB Plc and Forte Oil Plc raised N14 billion via corporate bonds.
Forte Oil raised N9 billion at 17.5 per cent coupon rate while FCMB raised N5.1 billion at 17.25 per cent coupon rate.
“Forte Oil Nigeria Plc has raised N9 billion naira with the sale of five-year bonds carrying an interest rate coupon of 17.5 per cent, under a 50 billion naira debt programme. The bond was issued at a par value of 1,000 naira each and was fully subscribed, they said in a statement,” its advisers said on Tuesday