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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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Treasury Bill Investment: Ghana Vs Nigeria, Further rate decline expected as N405 billion worth of treasury bills mature , CBN’s N225.45 billion T-bills auction records oversubscription, as rate fall below 5% , Nigeria’s 364-day treasury bills falls to 3.84% per annum

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.

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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.

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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.

Olumide Adesina a French-born Nigerian, an Investment Professional at Nairametrics Financial Advocates, owners of Nairametrics.com. Olumide Adesina is a certified Investment trader, with more than 14 years of working experience in Financial trading. His work experience covers trading commodity derivatives and analysis of global equities, currencies, commodities, cryptocurrencies, and Fixed Income instruments. A member of the Chartered Financial Analyst Society. You can follow Olumide on twitter @tokunboadesina and email via olumide.adesina@nairametrics.com.

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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Coronavirus

Sanwo-Olu gives incentives to businesses to prevent job loss

Babajide Sanwo-Olu noted that the state is Nigeria’s number one commercial centre and a massive job loss will not bode well for it’s economy

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Bond: Lagos to rAN100 billion for infrastructural development, COVID-19: Lagos asks civil servants to stay at home, No public buses between 7pm and 6am, Okada ban takes effect from May 4 – LASG, No public buses between 7pm and 6am, Okada ban takes effect from May 4 – LASG, Sanwo-Olu gives incentives to businesses to prevent job loss

Lagos state governor, Babajide Sanwo-Olu, has promised that any business that employs a large number of people will receive incentives from the state government in order to prevent massive job loss in the state.

He noted that Lagos state is Nigeria’s number one commercial center and heavy job losses will not bode well for the economy of the state, and the country.

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“We are having conversations with different sectors on the requirements they need to ensure they do not retrench their staff. What many of the companies want will affect the State’s IGR but we are willing to make the sacrifice to prevent the loss of livelihood of our citizens,” the governor stated.

The phased reopening of the economy

The governor explained in his tweet that all businesses were still required to follow the Register-to-open initiative, and put all facilities in place before they would be allowed to reopen.

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(READ MORE: COVID-19: Best and worst case scenarios for the Nigerian economy)

According to him, the state will consider companies in the construction and manufacturing sector as top priority in the first stage of the reopening, while businesses in the entertainment and hospitality sector will be considered for reopening in the second phase, as the state tries to balance economic reactivation with COVID-19 management.

“We are caught between managing hunger & sustaining an economy that is not only dependent on commercial activities in Lagos alone but also in other states.  

“We are at the stage where we have to balance public health safety & the economy that affects the wellbeing of the people” Sanwo-Olu stated. 

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He urged Lagosians to support the government in breaking the cycle of transmission, by adhering to the guidelines from the authorities.

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Around the World

Air Peace to evacuate stranded Indians from Lagos to Kerala

A list of the passengers to be attended to has already been given and the flight shall depart Lagos on May 30, 2020, to Cochin Airport, Kerala.

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Air Peace signs deal with Brazillian aerospace company , Air Peace suspends flight operations over COVID-19

The management of Air Peace Nigeria has been contacted by the Indian High Commission in Nigeria to undertake the evacuation of stranded Indian nationals to Kerala, India. This was disclosed by the airline via its Twitter handle.

The airline explained that a list of passengers that would be attended to have been released and it has started reaching out to the Indians on Saturday.

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It stated, “A list of the passengers to be attended to has already been given to us and we have commenced reaching out to them. The flight shall depart Lagos on May 30, 2020, to Cochin Airport, Kerala.”

The flight is not free anyway. According to the airline, payments are expected immediately and they are Economy is $1.300 and Business class is tag $1,700. “You are equally allowed to pay in Naira at N460/$,” it added.

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However, some Indians in Nigeria has reacted with mixed feelings to the development on Twitter. While some were ready to join the flight back home, others called for the refund of ticket fare booked a week ago.

READ ALSO: Hope rises as Emefiele set to meet MTN, 4 banks today.

For instance, Jayant Khamesra requested for the refund ticket fare of N568, 100, which he paid for a flight from Lagos to Delhi.

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He said, “Please refund ticket fare P47812 LAGOS to DELHI. No show by Air Peace and it is been 1 week now, there has been no refund or confirmation of the same. Reference ALHN79 amount N568,100. I am sure a good world-class carrier like Air Peace won’t delay refunds purposely. Please act fast.

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Coronavirus

The World’s Economy may not survive without a vaccine

Industries like tourism and travel with social distancing rules in place will only scramble for the little they can get while sports stadiums, entertainment hot-spots, etc., will remain closed.

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The World’s Economy may not survive without a vaccine

As parts of the world restart economic activities, it is becoming clear that the worst plunge in modern history would need a vaccine or cure before things can revert to normal.

In response to the exogenous shock that is the Covid-19 pandemic, leaders, researchers, analysts, and experts have sought methods, options, – anything to reduce the negative impact of what many now regard as the worst slump since the 1930s. So far, different parts of the world have put systems and structures in place to allow a level of economic activity to continue as it became increasingly clear that full social welfare was simply unsustainable. This is, however, not without the existence of relevant restrictions like temperature checks, social distancing rules, and the latest fashion accessories – masks and gloves.

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READ ALSO: Nigerian economy going into recession, might contract by -8.9% – Finance Minister

While this is an admittedly better development than the enforced total lockdown – at least for the economy, this too has its limitations. Economic activities have taken on a sluggish growth pace and while production might continue, global demand remains hamstrung. Industries like tourism and travel with social distancing rules in place will only scramble for the little they can get. Sports stadiums, entertainment hot-spots, etc., will remain closed. Even with the increased dependence of delivery services, restaurants will struggle to make what they used to before. Jobs have been cut and even more will. In essence, the partial reopening of the economy isn’t also sustainable. Yet, it is impossible to ignore the virus itself especially given the risks of a resurgence of the virus in already treated patients and the increasing cases in many parts of the world.

Data obtained from Bloomberg revealed that people infected around the world reached 5 million with a death toll of over 330,000. With the pandemic still on our tails, finding a vaccine is our best bet – and nothing else might be able to beat that. Stephen Jen, CEO of Eurizon SLJ Capital – hedge fund and advisory firm in London told Bloomberg News that there’s some sort of bounty on the virus globally.

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READ MORE: Osinbajo sets up committee on reopening of Nigerian economy, suspends loan deductions for states

In his words, “I don’t see how it is wiser for investors to bet on the virus than to bet on science, technology, and unlimited political and financial capital in the world to contain and defeat the virus.”

Also, the shares of American drug maker based in Massachusetts, Moderna Inc., hit a record high early in the week, as a result of its early data from a small trial of the company’s Covid-19 vaccine. It, however, gave up some of those gains days after stock traders scrutinized the early nature of the vaccine data.

Bloomberg Economics predicts that the restriction and shutdown of businesses triggered a plunge in economic activities of about 30% and their findings found that the first steps to relax controls will have a good impact on activity than later ones. Yet, our optimism is palpable. Anita Zaidi, Director of Vaccine Development and Surveillance at the Bill & Melinda Gates Foundation have advised that the process of creating an effective immunity could take years, and even then it will have to solve the issue of logistics that is making the vaccine readily available globally.

Today, the world waits in hope that this too passes like many of its predecessors. While it will indeed pass, there still is no saying how long it will take before life reverts to a new but sustainable normal.

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