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Thu, Mar

High Interest Rate On Investments While Naira To Appreciate Further - CBN

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During the week spanning through 26th to 3oth August 2019, Central Bank of Nigeria (CBN) is set to auction N169.85 billion worth of Treasury Bills (TBs). This will reflect in a high interest rate on investments in the Country. The decision was borne out of the massive under subscription incurred by the Federal Government of Nigeria (FGN) Bond auction of N145 billion conducted by the Debt Management Office (DMO).

 

It was learned that he bond auction recorded 34.4 percent under subscription, with the DMO selling N59.53 billion comprising N14.05 billion worth of five-year bonds, N17.68 billion worth of 10-year bonds, and N27.80 billion worth of 30-year bonds.

Notwithstanding, the bonds were auctioned at higher stop rates of 14.29 percent, 14.39 percent, and 14.59 percent respectively from 13.35 percent, 13.64 percent and 14.12 percent in the previous July 2019 bond auction.

The development prompted analysts to attribute the under-subscription and higher rates to weak demand from foreign portfolio investors (FPIs), due to increased risk perception of the country.

This is so because the higher rates at the auction reflect investor’s perception of the country’s riskiness especially in the face of an impending global economic recession.

In the same vein, the Naira will in this week (26th to 3oth August, 201), sustain its two weeks upward trend against the US dollar in the Investors and Exporters (I&E) window while the nation’s external reserve declines further below $44 billion, the first time since March 2019.

Recall that, during the previous weeks in August 2019, naira appreciated by 30 kobos in the I&E window, as the indicative exchange rate dropped to N363.14 per dollar at the close of business on Friday,23rd August 2019 from N363.42 per dollar the previous week.

The foregone development represents the second consecutive week of naira appreciation in the window, after four weeks of steady depreciation, with the I&E exchange rate rising to N363.44 per dollar as at August 9, 2019, from N360.79 in July 19, 2019.

Also, the upward shift of the naira in the Foreign Exchange (FOREX) market followed increased intervention by the CBN in the window, reflected in $3.6 billion traded in seven consecutive days, from Wednesday, August 14 to Friday, August 23, 2019.

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