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Debt Securities

Some experts are uncertain of what to expect from money markets in H2 2020

In the meantime, liquidity in the Nigerian banking system is said to be below N100 billion

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Some experts are uncertain of what to expect from money markets in H2 2020

Money market experts are uncertain over what to expect as the second half of the year takes off. This uncertainty is specifically hovering over the treasury bills and OMO (Open Market Operations) side of the market, according to Constance Onyia, a Fixed Income Dealer with Access Bank Plc.

Speaking to CBN Africa, yesterday, about what is happening in the money markets and what to expect during the second half of the year, Onyia said the CBN’s changing strategy has made it difficult to be predictive.

“Actually, we are expecting OMO auction tomorrow. But being that CBN’s strategy has changed (in the last two months they’ve not been rolling over all the maturities and sometimes they don’t even come for OMO), we don’t know what to expect; if there will be OMO auction tomorrow or not. And even if there’s an auction, they might no rollover everything on offer. So, we see that the strategy has changed a bit and we don’t know what to expect for the month or for the second quarter,” she said.

READ ALSO: African Development Bank to launch African Economic Outlook 2020 Supplement

Meanwhile, when the Head of Fixed Income Trading at United Bank for Africa (UBA) Plc, Bankole Odusanya, was asked the same question, he said “the Debt Management Office has a calendar and what is on play is simply that the exact amount that is maturing is what they plan to offer. If we saw that they increased the amount they wanted to offer, then you could be tinkering with your pricing. So, the amount that is maturing by-weekly (on Thursdays) is what they plan to raise.”

In the meantime, liquidity in the Nigerian banking system is said to be below N100 billion. And because this liquidity level is not excessive, experts do not expect the CBN to come in heavily with OMO maturities. As Odusanya pointed out, the amount of OMO bills by the CBN has reduced significantly over the last few weeks, even as the apex bank now relies more on Cash Reserve Ratio (CRR) to control liquidity.

READ MORE: Nigerian Treasury Bills fall to 3.84% per annum

You may watch both interviews with Onyia and Odusanya by clicking here and here.

Emmanuel is a professional writer and business journalist, with interests covering Banking & Finance, Mergers and Acquisitions, Corporate Profiles, Brand Communication, Fintech, and MSMEs.He initially joined Nairametrics as an all-round Business Analyst, but later began focusing on and covering the financial services sector. He has also held various leadership roles, including Senior Editor, QAQC Lead, and Deputy Managing Editor.Emmanuel holds an M.Sc in International Relations from the University of Ibadan, graduating with Distinction. He also graduated with a Second Class Honours (Upper Division) from the Department of Philosophy & Logic, University of Ibadan.If you have a scoop for him, you may contact him via his email- [email protected] You may also contact him through various social media platforms, preferably LinkedIn and Twitter.

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Debt Securities

FEC approves new Debt Management strategy for 2020–2023

The FEC has approved a new Medium Term Debt Management Strategy (MTDS) for Nigeria.

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Debt Management Office resumes FGN savings bond offer on August 10, Eurobonds, Patience Oniha, DMO, External debt servicing

The Federal Government has indicated it is looking inward as far as debt is concerned.

This point was unscored in the approval of the medium term Debt Management Strategy for the period 2020-2023 as disclosed by the Debt Management Office (DMO) in a statement issued on Wednesday after the FEC held its meeting in Abuja.

The MTDS  policy as a document tries to articulate the debt mix of the government considering the cost and risk trade-offs that best suit the country’s broader macroeconomic and public debt management

READ: Investors scramble for DMO sovereign sukuk as it records 446% oversubscription

It stated, “The MTDS, 2020-2023 has been prepared by the DMO, in collaboration with Federal Ministry of Finance, Budget and National Planning and the Central Bank of Nigeria.

“Other collaborating stakeholders are the Budget Office of the Federation, National Bureau of Statistics and the Office of the Accountant-General of the Federation.”

READ: Nigeria’s high recurrent costs, low revenue and escalating debt numbers

What has changed

With the new strategy, a larger proportion of new borrowing will be from domestic sources using long-term instruments while for External Borrowing, concessional funding from multilateral and bilateral sources will be prioritised.

Also, the target of fiscal sustainability has been increased from 25% (MTDS, 2016-2019) to 40% in the new strategy.

In simple language, the government wants to increase borrowing from 25% of GDP to 40%. While this will provide investment outlets to investors and mop up cash and calm inflation rate, it will also put a lot of pressure on the domestic debt market, interest rate and liquidity.

READ: Mining Cadestre Office (MCO) generates revenue of N2.303 billion in 2020

The target, according to DMO, was increased to accommodate new borrowings to fund Budget Deficits and other obligations of Government; Promissory Notes to be issued to settle Government Arrears; and, the Ways and Means Advance at the Central Bank of Nigeria.

DMO added that the strategy would sustain the issuance of longer-tenored instruments with tenors of 10 years and above, in order to effectively manage Refinancing Risks.

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Why it matters

The new debt policy has to be reworked in light of the current global pandemic, reduced revenue from shock and volatility in the oil market. The public works in the budget will be funded, indicating there is a low likelihood of project abandonment.

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Government appetite for debt seems to have found some cover or justification from the assertion by DMO that Nigeria is still well below the threshold 55% for countries in Nigeria’s peer group, but massing debt could constraint government flexibility in public finance in the coming years and reduce monetary policy tool available to CBN.

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Debt Securities

Ecobank Nigeria to launch $300 million senior notes on International Debt Market

Ecobank Nigeria has announced that it is seeking to raise $300 million from the international debt capital market through the issuance of senior notes.

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Ecobank Nigeria

Ecobank Nigeria, a subsidiary of Ecobank Transnational Incorporated (‘’ETI’’) has announced that it is seeking to raise $300 million from the international debt capital market through the issuance of senior notes.

This is contained in a disclosure signed by the Group Head, Adenike Laoye and published on the website of the Nigerian Stock Exchange (NSE).

READ: Nigeria makes sudden U-turn, suspends external borrowing from international debt market 

According to the bank, the proceeds from the Eurobond will help to provide medium-term funding for the company and also help to enhance its capacity to support international trade and service in Africa.

A part of the disclosure reads, “Ecobank Nigeria Limited (the “Bank”), a key subsidiary of Ecobank Transnational Incorporated (“ETI”) is seeking to raise capital from the international debt capital market through the issuance of US$300 million senior notes (the “Notes”), pursuant to the United States Securities and Exchange Commission Rule 144A and Regulation S (the “Transaction”).”

READ: FUGAZ; Nigerian banks considered too big to fail

What you should know

  • The Notes will be listed on the London Stock Exchange through a Dutch special purposes funding vehicle.
  • The bank also noted that the transaction is subject to prevailing market conditions and the conclusion of the necessary transaction documentation.
  • It is important to note that Ecobank Nigeria intends to list the Notes on the London Stock Exchange, with the expectation that the Notes will be traded on its regulated market.
  • Also, the Central Bank of Nigeria has confirmed that it has no objection to the Transaction, as stated in the disclosure.
  • Recall that Nairametrics reported in January that Ecobank Nigeria announced that it secured a N50 billion, 10-year bilateral subordinated loan with the aim of maintaining stable liquidity and improving its balance sheet.

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