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Nigerian Treasury bills fall to 5.3% per annum

The latest data from the Central Bank of Nigeria reveals Nigeria’s 364-day treasury bills have fallen to 5.3%.

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Nigerian money markets

The latest data from the Central Bank of Nigeria reveals Nigeria’s 364-day treasury bills have fallen to 5.3%.

182-day bills went for stop rates of 3.78% and 91-day rates 2.49% per annum respectively. The total amount on offer for 364-day bills was N70.50 billion with investors staking about N190.23 billion. The total amount on offer for 182 and 91-day were N14 billion and N1.8 billion, while investors staked N29.45 billion and N23.77 billion respectively.

Why this matters: The massive disparity between the subscriptions and the offers suggests investors are willing to earn a negative real return compared to the higher risk in other assets such as stocks and real estates.

Meanwhile, the Central Bank of Nigeria (CBN) has stated that it would issue N512.7 billion worth of Treasury Bills in the second quarter of 2020 (Q2).

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READ MORE: Nigerian Treasury Bills: Learn everything about Tbills

The disclosure was made by the CBN in the Treasury Bill programme released on its website, covering the second quarter of 2020. The N512.7 billion treasury bill planned for Q2 2020 represents a drop of N361.7 billion when compared to the over N874.4 billion issued in Q1 2020.

Details: The breakdown of the calendar shows that N94.24 billion will be raised in the 91-day maturity period, N86.18 billion for 182 days and N332.35 billion for 364 days maturity period.

Basically, the CBN sells T-bills on a bi-weekly basis to investors and is one of the safest investments available. Interests are paid upfront and the principal paid in full upon maturity.

Understanding Treasury Bills: Basically, when the government is going to the financial market to raise money, it can do it by issuing two types of debt instruments – treasury bills and government bonds.

Treasury bills are issued when the government needs money for a short period while bonds are issued when it needs debt for more than say five years. The issuance of treasury bills is also used as a mechanism to control the circulation of funds in the economy.

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READ MORE: Technical Analysis of Zenith Bank for 9th March 2020

Treasury bills have a face value of a certain amount, which is what they are actually worth. However, they are sold for less. For example, a bill may worth N10,000, but you would buy it for N9,600. Every bill has a specified maturity date, which is when you receive the money back.

The government then pays you the full price of the bill (in this case N10,000), giving you the opportunity to earn N400 from your investment. The amount that you earn is considered as the interest, or your payment for lending your money to the government. The difference between the value of the bill and the amount you pay for it is called the discount rate and is set as a percentage.

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Olumide Adesina is a French-born Nigerian. He is a Certified Investment Trader, with more than 15 years of working expertise in Investment Trading. A member of the Chartered Financial Analyst Society. Financial Market; Yale University, Behavioral Finance; Duke University. You can follow Olumide on twitter @tokunboadesina or email [email protected]

1 Comment

1 Comment

  1. Ochiabuto emeka

    March 20, 2020 at 4:21 pm

    The lowering of TB rate recently based on the idea of risk free to me is an illusory myopism, for some few reason based on common sense:
    1. Even if TB falls to 1% pa, people will still stick their head to it, because their is nothing as certain as near certain. I keep asking why will CBN forget regulating banks but jump into regulating the banks publics. What is the ratio of savings rate to lending rate. The point is if the CBN instructs banks to make their savings rate as a percent of their lending rate (say 30%) then who will be running into the TB market. The funds will be channeled into key activities through lending.
    2. CBN should never forget that their role is monetary and not structural. Thus monetary policy cannot kill itself for Nigeria fundamental issues

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Energy

NNPC opens bid for repairs of pipelines and depots on a finance and operate basis

The project is expected to be operated on a public-private partnership basis.

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Pipeline Vandalism: Stakeholder collaboration, critical to tame menace - Kyari, Nigeria explains when it will fully comply with OPEC+ output cut

The Nigerian National Petroleum Corporation (NNPC) declared open on Tuesday, August 11, bids by interested private investors to repair the pipelines and depots that are serving the refineries.

These pipelines, built almost 4 decades ago, are very critical in the successful movement of crude oil to the country’s 3 refinery complexes located in Port Harcourt, Kaduna and Warri, and the subsequent movement of the finished petroleum products to the consumers.

The pipelines, which according to NNPC are in dire need of comprehensive repairs, have experienced years of incessant theft and vandalism as well as ageing.

This project is expected to be operated on a public-private partnership basis as the bidders are expected to finance and execute the project, then operate for an agreed number of years before transferring back to the NNPC. In other words, the bidders for the extensive repairs of these pipelines would have to finance them independently and operate for a defined period in order to recover their investment costs with throughput tariffs.

It must be noted that this model is similar to the one that had been in place by the state oil giant for the refineries. The NNPC had also announced plans to get private investors to invest in the repair of the 3 refineries on a repair and operate basis, as they do not want to be involved in the management of these refineries.

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The NNPC Group Managing Director, Mele Kyari, had said that the ultimate plan for these refineries was to allow it to run on the LNG model, where the shareholders would be free to decide on the fate of these refineries going forward.

The refineries, which have only run sporadically, were shut down by NNPC earlier this year while awaiting repairs and upgrade. These 2 projects are expected to be handled separately according to information made available on Tuesday.

In addition, the new pipelines would need intrusion detection systems, as well as deep burial, to stop theft or vandalism. The deadline for the submission of these bids is due by September 18.

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Economy & Politics

WTO Job: Okonjo-Iweala reveals how to resolve the rift between US and China

Mrs Iweala revealed how she hopes to resolve the rift between the United States of America and China.

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WTO, Okonjo-Iweala joins South Africa's presidential economic advisory council as nation struggles with recession

As the jostle for the top job at the World Trade Organization (WTO) becomes more intense, the Nigerian candidate, Ngozi Okonjo-Iweala, has disclosed some of her plans for the institution. The former Nigerian Finance Minister recently had an exclusive interview with CNBC Africa.

Speaking during the interview, Mrs Iweala revealed how she hopes to resolve the rift between the United States of America and China, the 2 biggest economies in the world, especially as regards trade issues. She also noted that part of her vision is to build a trade institution where there is greater trust among its members. She also stressed that the WTO, at this critical time, is needed to ensure that trade and global markets remain open.

READ MORE: Gold price up as COVID-19 cases rise, U.S-China tensions heighten 

On healing the rift between the US and China, Okonjo-Iweala admitted that it is going to be challenging and not be easy. She said:

Well this is not going to be easy, if it was easy, it could have been done a long time since. So it would be very challenging but it is not an impossible job. It is very clear that both the US and China have been helped and benefitted from the multilateral trading system in the past. Hundreds of millions have been lifted out of poverty. They have experienced shared prosperity in the economies and their countries.’

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The Nigerian candidate pointed out that it is important to remind the US and China of this shared prosperity. She then disclosed that she would listen to both countries to find out what really are the issues causing distrust among them. She said that she will not want to be involved in the larger political problems, but will rather separate the trade issues and focus on them and build this trust.

READ MORE: Dangote fertilizer plant to begin production this year

Going further on how to settle their rift, Okonjo-Iweala said, “You need to begin to find areas where there can be confidence-building and trade. Building trust is not talking about it, you have to have areas where both can work together and agree and we have a golden opportunity in the fisheries subsidies negotiations that are going on now because the US is a party to it, China is a party, the EU, all other members.’’

“It is a multilateral negotiation, so if they can sit around the table with others to negotiate this and have a successful outcome, that is one thing that will be shared in common between the 2. So that will begin to build confidence. Then reaching out both in the US and in China to talk to the policymakers, go where the decisions are made, talk to congress also in the US and begin to show the benefits of the system again.’’

READ ALSO: FG inks $3.9 billion deal with Chinese firm for construction projects 

She also said they will look at reasons why they need to work together because their rift may be causing negative externalities for other members. She is of the opinion that exposing all of these, working with them, and listening carefully will begin to build confidence.

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She believes that while achieving this will be difficult, focusing seriously on trade issues can create room for a breakthrough.

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Coronavirus

US hands over 200 ventilators to Nigeria

The US Ambassador to Nigeria said USAID and  Nigeria will work very closely over the next couple of weeks.

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US hands over 200 ventilators to Nigeria

The United States of America, on Tuesday, August 11th, handed over some 200 ventilators to the Federal Government of Nigeria. This was disclosed by the Federal Ministry of Health via its Twitter handle, following the handover ceremony in Abuja.

The US Ambassador to Nigeria, Ambassador Mary Beth Leonard, at the handover event, explained that the ventilators are compact & portable & can be easily mobilized to reach those patients with the most severe symptoms of COVID-19.

Speaking during the handover ceremony, the Ambassador said, “Their arrival fulfills the commitment discussed between US and President Muhammadu Buhari earlier this year. Our support includes; training on the use & maintenance of this equipment, ensuring that the ventilators can address other respiratory illnesses in the years beyond.”

According to her, the United States Agency for International Development (USAID) and  Nigeria will work very closely and energetically over the next couple of weeks, with the Presidential Taskforce on COVID-19, to bring these ventilators across each of Nigeria’s states & the Federal Capital Territory.

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“The United States has been pivotal in supporting Nigeria’s membership in the ‘Every Breath Counts’ Coalition. Nigeria is now one of 2 countries in Africa to have an “oxygen roadmap” that seeks to fight against pneumonia, hypoxemia, & now COVID-19,” she stated. She then added that as the U.S. Ambassador to Nigeria, she remains proud of the strong friendship between the two countries.

The Backstory: Last April, Nairametrics had reported when the Minister of Information, Lai Mohammed, said that “President Donald Trump assured that the United States stands in solidarity with Nigeria in this difficult time and promised to send ventilators to support the country in its fight against the pandemic.”

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