Banks invested N843bn in treasury bills in Q2 2018

NIGERIAN BANKS DOMINAT ED the Nigerian treasury bills market during the second half of 2018, accounting for 49.93 percent of the entire transactions in that market.

According to the Financial Stability Report for the second half of 2018, which has just been released by the Central Bank of Nigeria, CBN, a total of N1.653 trillion treasury bills were issued during the period under review, with commercial banks and foreign investors taking up N843.41 billion of the issued treasury bills, or 49.93 percent.

Merchant banks took up N30.05 billion of the bills, while mandate and internal funds customers bought the balance of N815.57 billion or 48.29 percent.

The CBN said the Nigerian Treasury Bills (NTBs) for 91-, 182and 364-day tenors investment totalling N1,689.02 billion were issued and allotted in the second half of 2018, indicating an increase of N35.66 billion or 2.16 per cent, from the N1,653.37 billion recorded in the first half of 2018. It attributed the increase to the rise in NTB issues.

“Total subscription for NTBs was N3,136.83 billion during the second half of 2018, indicating a decline of N440.12 billion or 12.30 per cent from the N3,576.95 billion recorded in the first half of 2018.

“The average marginal rates for the issues ranged between 10.0000 -11.0000 for the 91-day, 10.4000 -13.4900 for the 182-day and 11.2200 -14.4500 for the 364-day tenors respectively”, it said.

However, the report said in the first half of 2018, commercial banks (including foreign investors) took up N920.07 billion or 55.65 per cent, merchant banks, N40.69 billion or 2.46 per cent, and mandate and internal funds customers, N692.61 billion or 41.89 per cent.

“The NTBs outstanding at end-December 2018 showed that commercial banks accounted for 47.11 per cent, parastatals,38.16 per cent, merchant banks, 1.31 per cent, and mandate and internal fund customers, 13.42 per cent”, the report said.

Realising that banks were not lending but investing in government securities, the CBN recently unveiled some policy measures to force banks to lend. Among these are the directive to banks to raise their loan-to deposit ratio to 60 percent and, lately 65 percent, and the decision not to remunerate bank deposits in excess of N2 billion in its standing deposit facility.

The CBN had earlier threatened to regulate banks’ investment in treasury bills as it tries to unlock excess liquidity trapped within the banking system in the hope that it will be channelled towards the real economy as against banks’ investment in federal government instruments.

As a result of the high yield gained from investment in government securities, four leading banks recently generated N281 billion from investing in treasury bills and federal government bonds in the half year ended June 30, 2019 audited result and accounts.

This is an increase of 19.5 per cent from N235.4bn generated by the same four banks in the prior H1 2018 audited result and accounts released to the Nigerian Stock Exchange.