The Central Bank of Nigeria (CBN) is scheduled to hold a Treasury Bills (T-Bills) Primary Market Auction (PMA) on 5th July 2018. The CBN will be offering N9 billion, N33 billion and N127 billion on 91-day, 182-day, and 364-day maturity periods respectively.
Before learning how to participate in this sale, here is a breakdown of the previous sale.
What does this mean?
In the last sale, the CBN sold N6.2 billion in 90-day treasury bills at an interest rate of 10.2%. The bills will mature on the 13th of September, 2018.
Treasury bills worth N50 billion were sold for the 182-day tenor, maturing on the 13th of December, 2018 at an interest rate of 10.5%.
They also sold N124.6 billion 364-day treasury bills, maturing on the 13th of June, 2019 at a rate of 11.5%.
All interests are per annum and payable upfront.
Now let’s look at the sale scheduled for this week.
What is the Minimum Amount I can Buy?
Previously, you could buy for as low as N10,000 and in multiples of N1,000 thereafter. However, this was increased to N50 million plus in 2017. You can still participate in this bid by approaching your bank and participating in the pooling fund option.
Here, the bank pools funds from others like you who do not have the minimum of N50 million plus required to participate in a direct bid. Some banks also have their own minimum limits for pooling funds which can be as high as N1 million. You will need to know if your bank’s minimum requirement is financially compatible with yours so that you can bid with them, or shop for another bank with a compatible benchmark.
How Can I Buy Treasury Bills?
Assuming you own more than N50 million and wish to participate directly in the bid, you will have to approach your bank and request a form. You fill the form with your personal information, indicating the amount you want to buy, the tenor, and your bid rate. The bid rate, otherwise called your stop rate, is the likely interest rate that you have indicated to receive for the principal that you will be investing in the TBs.
If you do not own up to the minimum requirement stipulated by the government, you can approach your bank and hope that your request is eligible to be pooled along with others like you. If it is, you then fill the form stipulating the amount, and duration for your bid.
How is the Bid Rate selected?
The CBN selects the bids that fall below the accepted marginal rates. The Marginal Rate is the minimum average rate for bids submitted within a bid window. For example, if the marginal bid rate for a bid opening on 5th July is 11%, then bids falling below this rate will be accepted and those above will be rejected.
Also, you can purchase TBs from the secondary market Over The Counter (OTC) through a broker.
Are Treasury Bills Safe?
Buying treasury bills is one of the safest forms of investment; they are backed by the full faith and credit of the Federal Government of Nigeria. They are also tax-free.
What if my funds don’t get pooled?
You still have another option. You can get the bank to sell to you rediscounted treasury bills. This is basically buying from someone else who is in need of funds and not willing to wait till maturity.
Banks typically prefer this option for retail investors who have less than N1 million in cash to invest. The difference between this and buying from the primary market is that you may not get the same interest rate when compared to those who bought from the primary market. However, the difference is not that huge.
Within 72 hours USDC Treasury transfers over 50,000,000 USDC to wallets
Crypto lovers continued to troop to stablecoins, as USDC market cap broke the $1 billion market capitalization.
In just three days, fast-growing cryptocurrency, USDC, a stable coin project founded by Circle and Coinbase, just released 50 million digital coins from its treasury to various wallets in less than 72 hours. Data compiled from Whale Alert, an advanced blockchain tracker, and analytics system showed the time these transactions took place.
According to Coinbase a leading American based crypto exchange, the consortium that mints USDC, collectively holds US$1.00 for every single USDC. These funds are held in a special bank account that is constantly monitored and audited.
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Crypto lovers continued to troop to stablecoins, as USD Coin’s (USDC) market cap broke the $1 billion market capitalization threshold for the first time since the stablecoin was launched in October 2018.
Quick Fact: USDC is a fully collateralized US dollar stablecoin. It is an Ethereum powered coin and is the brainchild of CENTRE, an open-source project bootstrapped by contributions from Circle and Coinbase. USDCs are issued by regulated and licensed financial institutions that maintain full reserves of the equivalent fiat currency in a 1 USDC:1 USD ratio.
Things you must know: Investors of stablecoins make money by earning dividends from the newly created digital coins being given to them for holding such stablecoin stock.
Brent crude records minor gain as growing concerns over COVID-19 limit upside
Brent crude is the leading global benchmark for Atlantic basin crude oils.
Brent crude gained about 0.68%, to trade at $43.08 a barrel by 5.01 am local time, after a 4.3% gain recorded in the previous week.
The implied volatility for Brent crude price has plunged to the lowest levels triggered by prices collapsing at the end of Q1 2020 as many oil traders shifted their attention to tightening oil output due to the agreement with the Organization of the Petroleum Exporting Countries (OPEC) and its allies.
Quick fact: Brent crude is the leading global benchmark for Atlantic basin crude oils. The international benchmark is used to set the price of crude oil for about two-thirds of the world’s traded crude oil, including Nigeria’s crude (Bonny Light, Brass River, Qua Iboe, etc.).
Stephen Innes, Chief Global Market Strategist at AxiCorp, in a note to Nairametrics, explained in detail the positive macros affecting oil prices. He said:
“Positive macro inflection points – most recently, the rebound in US employment – continue to support oil despite the disquieting trajectory in the US coronavirus cases.
“OPEC production, which is at the lowest level since 1991 has also been helping, both with sentiment and the fundamentals for oil.
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“And while the rebalancing of supply and demand still seems to be occurring more quickly than expected, risks remain. OPEC’s planned July 15 meeting may address the possibility of once again extending the most extensive phase of the OPEC+ production cut agreement.”
Amid rising numbers of COVID-19 cases in major cities of the world’s largest economy and consumer of crude oil, a Reuters tally showed that in the first four days of July alone, 15 states in America reported upward movement in the number of new COVID-19 infections, with events over the holiday possibly triggering another upsurge.
Analysts predict outlook for naira as forex unification plans gain momentum
The exchange rate could strengthen this week based on a positive set of assumptions.
The exchange rate between the naira and dollar may move in the positive for Nigeria’s local currency, according to views of a cross section of traders and analysts interviewed by Nairametrics.
Last week, Nairametrics reported that the Central Bank of Nigeria (CBN) had increased the bid price for FX at its Secondary Market Intervention Sales (SMIS) window by 5.6% to trade at N380 to $1. This was in line with the apex bank’s plans to unify the exchange rate towards the NAFEX rate.
As traders mulled the implication of the latest move by the CBN, the naira depreciated against the dollar at the parallel market to trade at N461.00 to $1, while gaining against the US dollar to trade at N386 to $1 at the I&E window. However, the exchange rate could strengthen this week based on a positive set of assumptions.
A treasury dealer at Nigeria’s biggest bank by assets told Nairametrics about the Central Bank’s continual intervention in the currency spot market and outlook for the naira. He said:
“The CBN will sustain its interventions in various windows with injection of $100million to Invisibles and Small and Medium-scale Enterprises (SMEs) segment at ₦384 to a dollar. Also, the CBN will inject c.$250million through the Retail SMIS on Friday.
“With the increase in base rate at last week’s Retail Auction to $/₦380 from the $/₦365, I expect similar revision of the official rate from $/₦361 to IEFX level in line with rate unification exercise which would boost Naira revenue from crude oil sale and qualify the CBN to draw-down from the IMF/World bank loan.
“The paucity of funds that IEFX window has experienced since the start of the Q2 will persist this week. Though, I expect the CBN to come up with plans to clear the backlogs of FX demands estimated at c. $5bn for offshores investors just like it did in 2016. Nevertheless, I expect Naira to trade at sub $/₦400 levels throughout the week.
“With this move in unifying the exchange rate system, it is also expected that the present converging of the rates estimated at N387 to $1 (I &E Window) will boost revenues for the federal government which could see a gain of N20 on every US dollar earning in oil.”
Whilst the debate rages on about what the true value of the naira is, several factors are at play. The CBN Governor had alluded to the fact that the lull in business activities suggested that forex demand should be low, thus calling into question the pent-up demand being highlighted by several market analysts.
The Central Bank governor suggested that the black-market rates being reported were likely not representative of what the real demand was, but rather driven by speculative forces.
Michael Nwakalor, Macroeconomist at CardinalStone Research, in a phone chat interview with Nairametrics expressed optimism on the naira appreciating at the black market this week. He said:
“Amid purported pressure from multilateral organizations for a unified exchange rate, the naira has noticeably weakened at both the NAFEX and parallel markets in recent weeks, with reports of a devaluation at the SMIS window from N360/$ to N380/$.
“We expect a possible unification to converge towards the NAFEX rate of N385/$ and if supported by increased FX supply and clear body language by the CBN, we may also see a steep recovery in the parallel market towards that rate. In the absence of this, we expect a characteristically quiet week in the FX market.”
Conversely, market analysts believe that the reluctance of the CBN to fund liquidity shortages at the I&E window is the reason why the black market has depreciated to about N461/$1. They claim legitimate transactions have already taken place in the parallel market, especially for businesses that have obligations to meet but cannot access forex from official windows.
Thelma Ugonna Ohiri-Anyanwu, CFA, a leading financial expert in a Nigerian tier-1 bank, was also optimistic about the naira stabilizing this week. She said:
“With the CBN devaluing the currency by 5.3% from N360 to N380 at its latest currency auction, this saw the market close at about N389 to a dollar. This I believe is in a bid at unifying the rate at the various windows.
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“In the coming week, with little or no significant activities to stimulate the market and no fundamental change, the naira will be relatively stable.
“The I&E window will likely trade around N388-389/$ levels. While the parallel market at N460 to 461/$ levels.”
CBN’s foreign reserves fell slightly during the week as FX outflows outpaced inflows. Data from Nigeria’s central bank showed that its foreign reserves stood at about $36.2billion.