The N150.6 billion worth of Treasury bill offered by the Central Bank attracted stop rates of 0.02% for the 91-day treasury bill, 0.19% for the 182-day, and 0.15% for the 364-day treasury bills, in the most recent primary market auction conducted by the apex bank.
When one factors in inflation, the above translates into negative rates. In the same way, Money market funds, most of which invest in treasury bills are currently yielding near-zero rates. Arm money market fund has a yield of 1.2231%; Stanbic IBTC money market fund, 0.71%; FBN money market fund, 1.65%, amongst others.
This ultra-low interest rate is beginning to cause pain to Nigeria’s money market funds, the bedrock of the country’s mutual fund industry. Until recently, money market funds in Nigeria were not known to suffer significant redemptions or withdrawals. That privilege or accolade seems to be a thing of the past.
I reported last week that going by the NAV Summary report released by the Security and Exchange Commission, SEC, for the week ending on November 13th 2020, 4 major money market funds recorded redemptions totalling about N8 billion. That trend has continued into the week ending November 27th 2020.
Information gleaned or extracted from the November 20th NAV Summary Report indicates that 3 money market funds suffered a combined redemption of N12.9 billion between November 14th and 20th. To be precise, Stanbic IBTC money market fund saw N7.96 billion flowing out, FBN money market fund lost N2.96 billion to redemptions, and ARM money market fund lost N2.065 billion to redemptions as well.
In the week ended November 27th, 5 money market funds suffered huge redemptions as well. In all, the money market category of funds recorded total redemption of N16.488 billion in the week ended November 20th 2020 and N12.6 billion in the week ended November 27th, bringing the total redemptions suffered by money market funds to N54.5 billion since the beginning of November.
Net Zero Effect: Within the same period, Bond/fixed income funds recorded total inflows of N43.5 billion, which is an indication that much of the money that left money market funds are finding their way into fixed income and bond funds.
As long as this continues to happen, the net effect on the mutual fund industry will almost net out to zero and the state of the industry will remain strong.
We are watching.
DMO reveals what infrastructure Sukuk Fund is financing
The Debt Management Office revealed that Sukuk funding is currently rehabilitating the Outer Marina Road in Lagos.
The Debt Management Office revealed that Sukuk funding is currently rehabilitating the Outer Marina Road which is a major road connecting Lagos Island to Victoria Island, Falomo and Ikoyi.
The DMO disclosed this in a statement on Wednesday evening.
“While the Outer Marina Road is a major artery on its own, It will also be instrumental to easing the traffic in Lagos during the repair of Falomo Bridge. Thanks to the SUKUK, we are able to rebuild Nigeria one infrastructure at a time,” it said.
— DMO Nigeria (@DMONigeria) April 7, 2021
What you should know
The Debt Management Office (DMO) announced last month that it listed its third sovereign Sukuk, N162.557bn 7-year 11.200% AL Ijarah Sovereign Sukuk due 2027, on the Nigerian Stock Exchange and the FMDQ Securities Exchange.
FG moves to issue Eurobonds, to select advisers through open bid
The amount to be raised is expected to be within the external borrowing plans for 2021.
The Federal Government has concluded plans to issue Eurobonds for 2021 and is going to pick advisers to the transaction through an open bid process.
The amount to be raised is expected to be within the external borrowing plans for 2021. The Federal Government in 2021 plans to raise $6.14 billion (N2.34 trillion) from foreign sources.
This disclosure was made by the Director-General of the Debt Management Office (DMO), Patience Oniha, during a chat with Reuters on Wednesday, April 7, 2021.
The Federal Government, who had earlier planned a Eurobond issue early last year after its sixth sale in 2018 where it raised $2.86 billion, deferred such plans due to the disruptions caused by the outbreak of the coronavirus pandemic.
The DMO boss at an investors conference with the Federal Government put together by Citibank, last year, said that the Federal Government had no plans to source debt from Eurobond in 2020 as it is going to shift its focus to domestic borrowing and sourcing from concessionary sources.
Earlier this year, Nigeria reduced its external borrowings in a new debt strategy after it redeemed its 6.75% $500 million Eurobond in January with Oniha saying that the DMO was monitoring international markets for new issues by frontier countries.
What you should know
- Ghana had some time last week raised $3 billion from Eurobonds, a year after the outbreak of the coronavirus pandemic, which disrupted economic activities globally.
- This will be a huge boost for Nigeria especially at a time the Federal Government is still struggling to get approval for the $1.5 billion loan from the World Bank due to issues on currency reforms.
- The Institute of International Finance had said it expected African governments to return to capital markets this year to sell bonds as investors embrace more risk.
Nairametrics | Company Earnings
Access our Live Feed portal for the latest company earnings as they drop.
- Cornerstone Insurance Plc notifies stakeholders of late submission of financial statements.
- NSE approves delisting of 11 Plc shares.
- Berger Paints Nigeria Plc reports a 67% decline in Profits in FY 2020.
- MTN Nigeria raises N73.5 billion from CP Issuance to finance operations.
- Jaiz Bank proposes dividend worth N884 million for shareholders.