CBN Withdraws N493bn from Circulation

In line with its monetary policy stance, the Central Bank Nigeria (CBN) last week withdrew a total of N493.394 billion from the system, through the sale of treasury bills.

The central bank sells treasury bills periodically to manage the level of liquidity in the system and control inflation.
The huge amount of both open market operations (OMO) and primary market auction (PMA) instruments issued by the central bank was basically to suck up inflow of funds from the over N203 billion that was paid into the system last week through matured treasury bills.

A breakdown of the treasury bills offered showed the amount sold was made up of N399.119 billion OMO bills and N94.275 billion PMA bills.

While the OMO instruments were sold last Monday, Tuesday and Friday, the PMA was offered to investors last Wednesday.
Data gathered from the Financial Markets Dealers Association (FMDA) showed that the fixed income instrument sold by the CBN was made up of: 69-day bills (N26.76 billion); 87-day bills (N63.11 billion); 90-day bills (N65.630 billion);91-day bills(N32.89 billion); 129-day bills (N79.66 billion); 142-day bills(N97.05 billion); 150-day bills (N66.91billion);182-daybills(N30billion);and 364-day bills(N31.39 billion).
The marginal rates (MR) for the 182-day and 364-day treasury bills dropped to 11.58 per cent and 11.70 per cent from 11.64 per cent and 11.74 per cent respectively in previous auction.

The outflow from the treasury bills sold more than offset the inflow from the N202.612 billion treasury bills that matured last week Thursday. The OMO bills that matured comprised of 164-day (N47.176 billion); 161-day (N47.662 billion) and 136-day (N13.500 billion), while the PMA includes 91-day (N32.888 billion); 182-day (N30 billion) and 364-day bills valued at N31.385 billion.

NIBOR
The Nigerian Interbank Offered Rates (NIBOR) increased slightly to an average of 11.93 per cent last Friday, as against the 11.33 per cent it attained the preceding Friday as the amount of outflow counteracted the inflow.
Specifically, outflows of funds due to payment for matured treasury bills offset the inflow of funds via the sale of treasury bills by the CBN.

Consequently, while the overnight (Call) tenor closed at 10.54 per cent on Friday, from 10.50 per cent the preceding Friday, the 7-day tenor also increased marginally to 11 per cent, from 10.75 per cent. In the same vein, just as the 30-day tenor closed at 11.62 per cent, from 11.04 per cent, the 60-day tenor increased to 12.08 per cent, from 11.29 per cent. The 90-day, 180-day and 365-day tenors all closed higher at 12.37 per cent, 12.79 per cent and 13.12 per cent respectively.

Dealers predicted that the NIBOR would rise this week as the liquidity position of the market dries up gradually.
The interbank market lubricates the financial system by moving cash to where it is most needed. This is the market for short-term lending among commercial banks and the price that banks charge each other is closely aligned with the interest rate set by the central bank.

Forex Transactions
The CBN offered a total of $600 million and sold $596 million at its regulated bi-weekly Retail Dutch Auction (RDAS) held last week. The naira depreciated slightly by 26 kobo as the marginal bid rates closed at $156.07 to a dollar last Wednesday.
On the other hand, the nation’s currency appreciated by N1.16 kobo week-on-week at the interbank segment of the forex market to close at $158.81 to a dollar, from N159.97 to a dollar the preceding Friday.. Also, at the bureau de change (BDC) segment, the naira was stable as it maintained its value of N162 to a dollar.
But the pressure persisted at the parallel market where the naira weakened by N3 to close at N166 to a dollar last Friday, compared with the N163 to a dollar it closed the preceding Friday.
“We attribute the pressure at the BDC segment of the foreign exchange market to rising demand from unofficial channels and this is expected to persist in the coming week,” analysts at Afrinvest Securities Limited said.

Bond Market
Trades in the bond market navigated to the buy side as yields declined on average by 0.2 per cent week-on-week, Afrinvest Securities disclosed.
The relatively stable interest rate environment has depressed disruptive volatility in recent time. In addition, the 5-year benchmark bond (15.10 per cent FGN APR 2017) declined the most (0.38 per cent, w-o-w) to close at 12.5 per cent. Also, yields of the Nigerian Eurobonds trended southwards, with the FGN (6.75 per cent JAN 28, 2021) declining by 0.15 per cent week-on-week to close at five per cent.

GTBank’s Q3 Results
Guaranty Trust Bank Plc (GTBank) last week announced a profit before tax of N82.36 billion for the nine months ended September 30, 2013, indicating a 7.12 per cent increase over N76.89 billion recorded in the corresponding period of 2012. The bank’s profit after tax stood at N69.24 billion as against the N63.734 billion earned in the comparable period of 2012. The results released by the Nigerian Stock Exchange (NSE) showed that the bank’s gross earnings rose to N181.96 billion from N166.48 billion the previous year. A further analysis of the results showed that the bank’s total assets stood at N1.875 trillion in the review period, compared to the N1.73 trillion it stood as at December 2012. Also, its customers’ deposit increased to N1.271 trillion in the period under review, compared to N1.148 trillion as at the end of December 2012.

Nigeria’s Debt Ceiling
Contrary to the raging debate that the country was over leveraged, a report last week argued that with an infrastructure deficit of $360 billion, a 40 per cent debt cap will be insufficient to grow the Nigerian economy. Nigeria’s Debt to Gross Domestic Product (GDP) recently climbed to 35 per cent and had renewed the debate over the optimal debt level. The Fiscal Responsibility Act of 2007 set a 40 per cent ceiling for Nigeria’s public debt to GDP, but the International Monetary Fund (IMF) raised the threshold to 56 per cent in 2013.
But the Financial Derivatives Company Limited (FDC) in its bi-monthly economic and business update pointed out that since the economic wellbeing of a country should be seen through the prism of a sound business entity, there ought to be a distinction between “bad debt run up” and “good debt build up”.

“For a country like Nigeria that has an infrastructure deficit of $360 billion, according to the African Development Bank (ADB), a 40 per cent debt cap is insufficient in getting the job done.

“An overhaul of the infrastructure gap would cost approximately $350 billion for an economy with an estimated GDP of $282 billion and an annual GDP growth rate of approximately 6.8 per cent,” the Lagos-based financial advisory firm stated in the report.
Multiple Taxation

The Tax Payers’ Association of Nigeria (TAPAN) last week called on the federal government to urgently harmonise taxes and levies across the country so as to stimulate economic growth. TAPAN, which commended the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, for her position on the effects of multiple taxation on the economy, also decried the cumbersome nature of tax filling processes faced by tax payers.

TAPAN’s Chairman, Board of Trustees (BoT), Mr. Valentine Nzekwe, and President, Mr. Philip Ilokhulo, said unless the minister’s advice was heeded, the trend could have adverse effects on businesses and the economy.
The association, which also disclosed plans to address the media at the weekend said it was concerned about multiple taxation and the use of tax payers’ fund in delivery the dividend of democracy.

The TAPAN while commending the President for the giant strides in the agriculture, works and transport sectors, wondered why some states would have 97 different taxes, levies and charges imposed on businessmen.

Source: ThisDayLive