New Telegraph

Analysts: Rising customer deposits, CRR curb FG’s borrowing

The surge in customer deposits, coupled with the Central Bank of Nigeria’s (CBN) Cash Reserve Requirement (CRR) policy may have prevented the Federal Government from taking advantage of low interest rates to issue a lot more Treasury Bills and bonds, this year, analysts at Coronation Research have said.

 

The analysts, who stated this in a report obtained by New Telegraph yesterday, noted that rising customer deposits had ensured that more CRR funds are currently available to the public sector compared to the beginning of the year.

 

The analysts said: “One might have expected the FGN, which carries a substantial budget deficit, to have issued a lot of T-bills and bonds this year, given the opportunity to finance itself at low rates. The strange thing is that the volume of outstanding T-bills and FGN bonds (including Sukuk bonds) has only risen by 11.8 per cent year-to-date, or by N1.37 trillion ($3.51bn). At the same time the size of  the CBN’s Open Market Operation (OMO) bill market has contracted by 43.9 per cent year-to-date, or by N4.29 trillion ($11.02bn). So, the sum of FGN and CBN obligations in their respective securities markets has shrunk by N2.93 trillion ($7.51bn) year to date.

 

“Where has it gone? A very obvious effect of a large amount of money leaving the OMO market, being received by pension funds and banks (when not being received by foreign investors), is that it moves into the T-bill and FGN bond markets, causing rates to fall. The face value of FGN bonds is some N10.55 trillion ($27.06bn) but their combined market capitalization is N16.69 trillion ($42.80bn). This, however, does not tell where all the money has gone.

 

 

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