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Update: CBN to bar individuals, start-ups from trading treasury bills 

The CBN has ordered all commercial banks and other financial institutions to ensure treasury bills are not sold to individuals and small firms.

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CBN releases new guidelines for OFIs, orders inclusion of NUBAN code or face sanctions

… as apex bank denies, says directive only affects OMO

Following an earlier report that the Central Bank of Nigeria (CBN) has ordered commercial banks and other financial institutions not to sell treasury bills to individuals and small firms from November 29, 2019, the apex bank has said its directive only affect the Open Market Operations.

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What it means: The development means that the treasury bills is still open to individuals and small firms.

CBN directed that all banks to exclude individuals and local corporates from investing in Open Market Operations (OMO) auctions with effect from October 23, 2019.

In a circular signed by Director, Financial Markets Department, CBN, Angela Sere-Ejembi, and cited by Nairametrics, the banker insisted that participation of the financial institutions at the auction should be on proprietary and non-proprietary basis, without the participation of the investors mentioned above.

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Good side of the directive: The development is expected to drive foreign inflows by restricting individuals and local corporate, leaving only the banks and foreign investors to participate at the auction.

On the flip side: There are concerns by some experts that the direction of the apex regulator is still unclear.

For instance, Comercio Partners Limited explained that its concerns remain the seeming unclear direction of the CBN with regards to monetary policy.

It stated, “This is a follow up to the circular released last week warning banks that all demand at auctions must be effective and fully backed by appropriate funding after observing high levels of unfunded bids at the OMO auction.  

“Whether this is a move aimed at protecting the Naira, checking the excesses of banks or managing its OMO issuance cost, the move would certainly engender some level of uncertainty, which markets do not like.”  

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However, the report indicated that it is only big corporate organisations that would be allowed to do treasury bills investments and that the banks were already notifying their customers of the new directive. But the existing treasury bills investments would be allowed to continue till the end of their maturity dates.

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Treasury, bills, calendar, Central Bank

If the apex regulator reverse it’s move to restrict individuals from trading treasury bills, it could also lead to an increase in savings deposits of the banks, attracting interest rates below what the treasury bills offered.

A source from the CBN, who pleaded anonymity as the bank would soon issue an official statement, said the move was to stop the mop-up of funds from the system through the treasury bills.

[READ MORE: CBN sets up committee to recover N36 billion credit facility]

Why CBN gave the directive: He said, “Many people with huge cash prefer to keep their funds idle in treasury bills instead of investing the funds. Some people collect huge severance package, have huge funds but they have refused to invest the money. 

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“We want these funds to be useful in the economy so that they will be available in the banks and can be invested to create more jobs in the country.” 

Abiola has spent about 14 years in journalism. His career has covered some top local print media like TELL Magazine, Broad Street Journal, The Point Newspaper. The Bloomberg MEI alumni has interviewed some of the most influential figures of the IMF, G-20 Summit, Pre-G20 Central Bank Governors and Finance Ministers, Critical Communication World Conference. The multiple award winner is variously trained in business and markets journalism at Lagos Business School, and Pan-Atlantic University. You may contact him via email - abiola.odutola@nairametrics.com.

7 Comments

7 Comments

  1. Okechukwu

    November 7, 2019 at 9:01 pm

    CBN has said that it is not excluding individuals from treasury bills only from the OMO space. Is this something you want to clarify for your readers? Thanks in advance.

  2. Margaret Giwa

    November 14, 2019 at 4:49 am

    Excluding individual from treasury bill,there must be another avenue provided by which individual can grow. The young must grow. There should not be any restriction.

    • Mark Zulu

      November 16, 2019 at 8:59 am

      Is an open market, why excluding individual investors, something is wrong , the upper class, owners of strong cooperations want to keep it to themselves via the CBN. That mean it is only for the big wigs.
      Those at the other side of the divide should to invest in other terrains. Remember there is no more box to think out of it, just think and start-up.

  3. Aaron

    November 15, 2019 at 4:59 am

    Does this mean individuals can no longer buy treasury bills through their banks? Why deny individuals of their rights to invest their funds in a relatively safe investment avenue?

  4. Madonna

    November 16, 2019 at 5:37 am

    CBN rejected my treasury bills deposit 2 times now,am not happy about that because it helps me a lot

  5. Omoragbon Sunday

    November 27, 2019 at 12:58 pm

    I think, when policies are rolled out, the issuing institution, need to look at both sides of the coin. It was 50M, & above, now individual, monetary policy makes think twices.

  6. Adewale Oyewo

    February 23, 2020 at 4:10 pm

    I think this CBN policy is not well thought out and as such would be counter productive. Denying individuals the purchase of Treasury bill on the excuse that such huge funds should remain in the system. Why not allow them trade in TB and lend such monies to the bank also on a short term on a reasonable margin and the same given out as loan to businesses who are ready to do business but cash trapped. As such there would be more money to do business and spending would increase and more jobs would be created. This policy is gagging the economy.

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Economy & Politics

Just in: Buhari seeks approval from green chamber to borrow fresh $5.5billion

Buhari, is also seeking the approval for the revised 2020-2022 mid-term expenditure framework (MTEF) which became necessary as a result of the crash in crude oil prices and the cut in the production output.

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President Muhammadu Buhari is seeking the approval of the House of Representatives to borrow fund to finance capital projects at the federal and state (to support state governors) levels in the 2020 budget.

This request was disclosed via the official twitter handle of the House of Representatives.

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The president’s letter, which indicated that the fund would be sourced locally and internationally, was read on the floor of the House of Representatives by the Speaker, Femi Gbajabiamila, during plenary on Thursday, May 28, 2020.

In the letter to the lower chamber, Buhari, is also seeking the approval for the revised 2020-2022 mid-term expenditure framework (MTEF) which became necessary as a result of the crash in crude oil prices and the cut in the production output.

Although the tweet did not contain the total amount of loan that is being requested, reports suggests that the President is seeking approval to borrow the sum of $5.513 billion from external sources to finance 2020 budget deficit and support state governments to meet challenges caused by the coronavirus pandemic.

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Details shortly…

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Business News

CBN’s MPC unlikely to cut rates, as Nigeria’s foreign reserves hit $36.16 billion

Note that Nigeria’s inflation could potentially rise to 14% by the end of the year due to a higher VAT and a weakened naira.

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CBN, GTBank, CBN disagrees with IMF, says land border closure boosting local production, Border closure: Emefiele says Benin, others must engage Nigeria before borders are reopened , bvn 2.0, CBN reveals banks’ foreign assets rise to N14.19 trillion in 2019

The CBN’s Monetary Policy Committee (MPC) is expected to leave the interest rate of 13.5% unchanged during its meeting later today.

The projection is coming on the heels of macroeconomic fundamentals released by the National Bureau of Statistics (NBS), which showed that inflation rose to 12.34%; its seventh consecutive monthly rise and highest level since April 2018.

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Note that Nigeria’s inflation could potentially rise to 14% by the end of the year due to a higher VAT and a weakened naira. Therefore, in order to minimise the risk of exacerbating inflationary pressures, the CBN is unlikely to further cut rates. This possible outcome from the MPC meeting will help stimulate economic growth, just like it did in 2019.

Meanwhile, despite the foreign exchange liquidity crisis being experienced in the currency spot market, data obtained from CBN revealed that the country’s foreign exchange reserves have further increased to $36.16 billion (Gross Estimate) as of 28th of May, 2020.

(READ MORE: Naira depreciates to N460/$1 at the parallel market, despite improved liquidity)

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The surge in Nigeria’s external reserves is due to the fact that the price of crude had gained more than 40% since the deadly COVID-19 pandemic started, coupled with reports that foreign investors are returning to Nigeria. The disbursement of $3.4 billion emergency facility by the International Monetary Fund (IMF) to CBN has also been a contributing factor.

Nigeria’s foreign exchange reserves hit $36.16 billion, Nigeria’s Central Bank MPC meet today

Recall that the CBN Governor, Godwin Emefiele, had promised more liquidity in the currency market, assuring that all genuine dollar demands would be met.

However, an Interest rate expert, Ola Oladele, during a phone chat with Nairametrics, advised that the CBN should keep its word by boosting Nigeria’s Forex supply as the persistent downtrend in the currency black market continues. She said:

“The depreciation of the naira in the parallel market as a result of low supply of FX from official sources and less optimistic outlook on the economy due to falling oil prices.

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“The BDCs haven’t received supply from official sources since our borders were closed and the crash in oil prices has made natural sellers of FX more cautious.

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“We hope that the recent statements by the regulator will restore confidence and subsequently, supply to the market.”

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Economy & Politics

Fourth Mainland Bridge to begin before December

The bridge is also designed to be a two-level bridge – the upper level will function as a means for vehicular traffic, while the lower level will stimulate and accommodate pedestrian, social, commercial and cultural interactions.

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Fourth Mainland Bridge to begin before the end of 2020

The Lagos state government has announced that in line with its vision for a smart city, work on the Fourth Mainland Bridge, will commence before the end of year 2020.

In addition to this, construction of the Lekki Regional road will also commence within the next seven months.

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Special Adviser to the Lagos State Governor on Works and Infrastructure, Engr. Aramide Adeyoye disclosed this during the Ministerial Press briefing organised by the State Government  

The architectural design done by NLE works proposed a design speed of 140km on the bridge, with 8 interchanges to facilitate effective interconnectivity between different parts of the State, and a Four-lane dual carriageway with each comprising 3 lanes and 2metres hard shoulder on each side.

(READ MORE: British High Commission releases flight schedule for final evacuation)

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The bridge is also designed to be a two-level bridge – the upper level will function as a means for vehicular traffic, while the lower level will stimulate and accommodate pedestrian, social, commercial and cultural interactions.

The proposed 38 km long fourth mainland bridge is expected to run through Lekki, Langbasa and Baiyeiku towns along the shoreline of the Lagos Lagoon estuaries, further running through Igbogbo River Basin and crossing the Lagos Lagoon estuaries to Itamaga Area in Ikorodu. It will then cross the Itoikin road and the Ikorodu – Sagamu Road to connect Isawo inward Lagos Ibadan Expressway at Ojodu Berger axis.

All of these routes are known to be traffic prone areas, and the construction of the bridge will ease traffic on these routes, thus reducing commute time for residents.

Recall that in April, the state government had shortlisted about 10 firms out of the 32 that expressed interest in the construction of the fourth mainland bridge. The bridge was estimated to be worth about N844 billion.

According to Engr. Adeyoye, the 10km long Lekki regional road will span “Victoria Garden City Scheme 1, connect VGC, Ikate Elegushi, Ikota, Chevron Drive, Ajiran, Pinnock Beach Estate, Gracefield Island and Orange Island, up to Freedom Road to Freedom Way at Lekki”

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Upon completion, this road will greatly ease traffic along the axis, serving as an alternative to the Lekki-Epe Expressway, which is already congested and is currently the only road serving the Lekki sub-region which connects directly to the Osborne/Third Mainland bridge corridor, Adeyoye assured.

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(READ MORE: LIRS further extends deadline for filing annual tax returns by one month)

More projects to come

Adeyoye noted that there are other ongoing projects such Agege-Pen Cinema, Agric-Ishawo Road and the Lagos-Badagry Expressway, as well as the infrastructural upgrade of Oniru network of roads, namely Muri-Okunola Extension, Ligali Ayorinde and Akin Olugbade, along with seven major junctions in Iru-Victoria Island Local Council Development Area.

Completed projects listed by Engineer Adeyoye include Iworo-Ajido and Epeme Roads phases 1 and 2, and the 6.65km two-lane single carriageway with a 300m bridge of 9m width, which was constructed by CCECC.

 

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