Economy

Customers’ Rush for Treasury Bills Worries Banks

Published

8 years ago

10/08/2017

By ThisDay

Nigerian banks are currently finding it extremely difficult to mobilise deposits from institutional investors such as Pension Fund Administrators (PFAs) and insurance companies as well as individuals due to the attractive treasury bills yields.

The increasing awareness of the opportunities in the treasury bills market is seeing a lot of banks lose deposits to fixed income investments.

This is because most investors and bank customers now benchmark interest rates on term deposit against treasury bill rates.

THISDAY findings showed that those affected most are the Tier 2 banks as they are finding it difficult to meet the demand of the fund holders.

But the Tier 1 banks are not under such pressure, THISDAY learnt.

The cash squeeze in the market clearly manifested in the interbank lending rate which increased to 23 percent on Friday from five per cent the preceding Friday.

The Nigerian Treasury Bill currently offers a unique investment opportunity to investors. It offers security and guaranteed premium returns to its investors.

Last week, the 364-day instrument offered by the Central Bank of Nigeria (CBN) recorded excess subscription to the tune of N91.1 billion, whilst the CBN allotted N136.5 billion at a stop rate of 18.5 per cent relative to the offered amount of N120 billion.

The 91-day (offer amount: N29.1 billion; subscription: N26.1 billion) and 182-day (offer amount: N80 billion; subscription: N69.75 billion) instruments were however undersubscribed, whilst the CBN allotted N23.2 billion and N69.57 billion at stop rates of 13.4 per cent and 17.4 per cent respectively.

An analyst at Ecobank, Mr Kunle Ezun, who confirmed the situation in the money market, said the banks are feeling the brunt now.

“A lot of the PFAs, insurance companies and individuals are not willing to do term deposit again. They prefer doing treasury bills.

“If they do term deposit, they get around seven per cent interest. But they can get as high as 18 per cent from treasury bills. A lot of the banks today are losing deposits because of this.

“What the PFAs are saying is that if you cannot match treasury bills, bring back my money. Individuals are also saying: if you can’t give what treasury bills will give me, I am not going to save money with you.

“If banks don’t have deposits, they can’t give loans. The few banks that are ready to match treasury bills rates are doing that at a cost,” Mr Ezun said.

The Chief Finance Officer, Wema Bank Plc, Mr Tunde Mabanwoku, also confirmed the challenge currently faced by the Tier 2 banks.

Mr Mabanwoku explained: “What we see now is that customers are increasingly benchmarking treasury bills rates. So, when customers come in that they want to do fixed deposits and you tell them its 12 per cent, they would be comparing what you tell them with treasury bill rates.

“So, customers are becoming a lot more aware of what is happening out there and they are saying if they can put their money in treasury bills at 17 per cent, why should they put their money in a bank at 12 per cent.

“So, banks have had to increase their cost of deposits just to match or get close to the sovereign rate.”

Also, the Managing Director, Afrinvest Securities Limited, Mr Ayodeji Ebo, disclosed that owing to the opportunities in the treasury bills segment, foreign exchange speculators who had converted their naira to the dollar are now re-converting the greenback, back to naira in order to invest in fixed income securities.

He said those that doubted the ability of the central bank to sustain its intervention are now convinced that the banking sector regulator has enough ammunition to sustain its foray in the market.

He said: “People have been observing the development in the forex market. We have observed for over four months, the CBN has continued to emphasise that they would continue to intervene.

“In addition to that, despite the frequent intervention by the CBN, the reserves have also not been depleting. So, that has boosted confidence.

“Also, if you look at the volume of transactions in the investors and exporters’ window, that has also increased and we have seen banks now re-introduce their naira cards for dollar transactions.

“So, those people that were trying to take arbitrage opportunities, especially those that entered when the dollar was as low as N400-N500, are trying to cut their losses by investing in risk-free investments like treasury bills. Luckily for them, the interest rate is also very high.”

Nigeria’s external reserves stood at $30.927 billion as at August 3.

ThisDay

Economy

Nigerian Stocks Close 1.13% Higher to Remain in Bulls’ Territory

Published

17 hours ago

20/12/2025

Dipo Olowookere

By Dipo Olowookere

The local stock market firmed up by 1.13 per cent on Friday as appetite for Nigerian stocks remained strong.

Investors reacted well to the 2026 budget presentation of President Bola Tinubu to the National Assembly yesterday, especially because of the more realistic crude oil benchmark of $64 per barrel compared with the ambitious $75 per barrel for 2025. This year, prices have been between $60 and $65 per barrel.

Business Post observed profit-taking in the commodity and energy sectors as they respectively shed 0.14 per cent and 0.03 per cent.

But, bargain-hunting in the others sustained the positive run, with the consumer goods index up by 3.82 per cent.

Further, the industrial goods space appreciated by 1.46 per cent, the banking counter improved by 0.08 per cent, and the insurance industry gained 0.04 per cent.

As a result, the All-Share Index (ASI) increased by 1,694.33 points to 152,057.38 points from 150,363.05 points and the market capitalisation chalked up N1.080 trillion to finish at N96.937 trillion compared with Thursday’s closing value of N95.857 trillion.

A total of 34 shares ended on the advancers’ chart, while 24 were on the laggards’ log, representing a positive market breadth index and bullish investor sentiment.

Austin Laz gained 10.00 per cent to close at N2.42, Union Dicon also jumped 10.00 per cent to N6.60, Tantalizers increased by 9.80 per cent to N2.69, Aluminium Extrusion improved by 9.78 per cent to N12.35, and Champion Breweries grew by 9.71 per cent to N16.95.

Conversely, Sovereign Trust Insurance dipped by 7.42 per cent to N3.87, Royal Exchange lost 6.84 per cent to trade at N1.77, Omatek slipped by 6.84 per cent to N1.09, Eunisell depreciated by 5.88 per cent to N80.00, and Eterna dropped 5.63 per cent to close at N28.50.

Yesterday, traders transacted 1.5 billion units worth N21.8 billion in 25,667 deals compared with the 839.8 million units sold for N32.8 billion in 23,211 deals in the preceding session, showing a surge in the trading volume by 76.61 per cent, an uptick in the number of deals by 10.58 per cent, and a shrink in the trading value by 33.54 per cent.

Economy

FrieslandCampina, Two Others Erase N26bn from NASD OTC Bourse

Published

18 hours ago

20/12/2025

Adedapo Adesanya

By Adedapo Adesanya

Three stocks stretched the bearish run of the NASD Over-the-Counter (OTC) Securities Exchange by 1.21 per cent on Friday, December 19, with the market capitalisation giving up N26.01 billion to close at N2.121 billion compared with the N2.147 trillion it ended a day earlier, and the NASD Unlisted Security Index (NSI) dropping 43.47 points to 3,546.41 points from 3,589.88 points.

The trio of FrieslandCampina Wamco Nigeria Plc, Central Securities Clearing System (CSCS) Plc, and NASD Plc overpowered the gains printed by four other securities.

FrieslandCampina Wamco Nigeria Plc lost N6.00 to sell at N54.00 per unit versus N60.00 per unit, NASD Plc shrank by N3.50 to N58.50 per share from N55.00 per share, and CSCS Plc depleted by N2.91 to N33.87 per unit from N36.78 per unit.

On the flip side, Air Liquide Plc gained N1.01 to close at N13.00 per share versus N11.99 per share, Golden Capital Plc appreciated by 70 Kobo to N7.68 per unit from N6.98 per unit, Geo-Fluids Plc added 39 Kobo to sell at N5.50 per share versus N5.11 per share, and IPWA Plc rose by 8 Kobo to 85 Kobo per unit from 77 Kobo per unit.

During the trading day, market participants traded 1.9 million securities versus the previous day’s 30.5 million securities showing a decline of 49.3 per cent. The value of trades went down by 64.3 per cent to N80.3 million from N225.1 million, but the number of deals jumped by 32.1 per cent to 37 deals from 28 deals.

Infrastructure Credit Guarantee Company (InfraCredit) Plc finished the session as the most active stock by value on a year-to-date basis with 5.8 billion units valued at N16.4 billion, followed by Okitipupa Plc with 178.9 million units transacted for N9.5 billion, and MRS Oil Plc with 36.1 million units traded for N4.9 billion.

The most active stock by volume on a year-to-date basis was still InfraCredit Plc with 5.8 billion units worth N16.4 billion, trailed by Industrial and General Insurance (IGI) Plc with 1.2 billion units sold for N420.7 million, and Impresit Bakolori Plc with 536.9 million units traded for N524.9 million.

Economy

Naira Crashes to N1,464/$1 at Official Market, N1,485/$1 at Black Market

Published

21 hours ago

20/12/2025

Adedapo Adesanya

By Adedapo Adesanya

It was not a good day for the Nigerian Naira at the two major foreign exchange (FX) market on Friday as it suffered a heavy loss against the United States Dollar at the close of transactions.

In the black market segment, the Naira weakened against its American counterpart yesterday by N10 to quote at N1,485/$1, in contrast to the N1,475/$1 it was traded a day earlier, and at the GTBank forex counter, it depreciated by N2 to settle at N1,467/$1 versus Thursday’s closing price of N1,465/$1.

In the Nigerian Autonomous Foreign Exchange Market (NAFEX) window, which is also the official market, the nation’s legal tender crashed against the greenback by N6.65 or 0.46 per cent to close at N1,464.49/$1 compared with the preceding session’s rate of N1,457.84/$1.

In the same vein, the local currency tumbled against the Euro in the spot market by N2.25 to sell for N1,714.63/€1 compared with the previous day’s N1,712.38/€1, but appreciated against the Pound Sterling by 73 Kobo to finish at N1,957.30/£1 compared with the N1,958.03/£1 it was traded in the preceding session.

The market continues to face seasonal pressure even as the Central Bank of Nigeria (CBN) is still conducting FX intervention sales, which have significantly reduced but not remove pressure from the Naira. Also, there seems to be reduced supply from exporters, foreign portfolio investors and non-bank corporate inflows.

President Bola Tinubu on Friday presented the government’s N58.47 trillion budget plan aimed at consolidating economic reforms and boosting growth.

The budget is based on a projected crude oil price of $64.85 a barrel and includes a target oil output of 1.84 million barrels a day. It also projects an exchange rate of N1,400 to the Dollar.

President Tinubu said inflation had plunged to an annual rate of 14.45 per cent in November from 24.23 per cent in March, while foreign reserves had surged to a seven-year high of $47 billion.

Meanwhile, the cryptocurrency market was dominated by the bulls but it continues to face increased pressure after million in liquidations in previous session over accelerating declines, with Dogecoin (DOGE) recovering 4.2 per cent to trade at $0.1309.

Further, Ripple (XRP) appreciated by 3.9 per cent to $1.90, Cardano (ADA) rose by 3.5 per cent to $0.3728, Solana (SOL) jumped by 3.4 per cent to $126.23, Ethereum (ETH) climbed by 2.9 per cent to $2,982.42, Binance Coin (BNB) gained 2.0 per cent to sell for $853.06, Bitcoin (BTC) improved by 1.7 per cent to $88,281.21, and Litecoin (LTC) soared by 1.2 per cent to $76.50, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.