Exploring Auctions, Euro bonds, & Policy Regulations

In Wednesday’s NTBs auction, the CBN sold over ₦161 billion in Treasury Bills compared to ₦1.36 trillion sold at the last auction. Similar to the outcome of previous auctions, investors sought higher returns by subscribing to bills with longer maturities – precisely the 364-day tenor. Concurrently, allotments remained constrained despite high subscriptions, suggesting continued efforts to manage liquidity and meet fiscal targets. The stop rates closed at 16.2399%, 17.0000%, and 21.1240% for the 91-day, 182-day, and 364-day tenors respectively, indicating a slight decrease of 100.01bps (6.16%) for the 91-day, 100bps (5.88%) for the 182-day and 37bps (1.73%) for the 364-day. It is safe to say that with these auctions, the DMOINFULL has begun to consider the cost of borrowing despite policy changes and liquidity constraints, highlighting the importance of effective monetary management in Nigeria’s financial markets. We await the trend from the Bond auctions slated for later in the day while also noting that the amount offered appears to be $450 billion.

The money market has been highly illiquid since the beginning of March 2024; earlier in the week, there was over ₦2 trillion in short positions. The observed illiquidity could be attributed to the excess borrowing by banks from the CBN and the high-volume allotments observed at the auctions (OMO, NTB and Bonds). Though a considerable inflow of about ₦932 billion was received on Thursday, March 14th, 2024, for the FGN 2024 Bond and NTB maturities, this was not enough to cover up the short positions.

Perhaps taking a cue from other African countries like Benin, Kenya and Ivory Coast, who have issued Eurobonds this year, Nigeria is gearing up to issue Eurobonds by June 2024 with the assistance of investment banks like Citibank, JPMorgan and Goldman Sachs as advisers. This shall be the first issuance in two years, as the last issuance was in 2022. Speculatively, this move aims to raise external funds, potentially up to $1 billion, to support the country’s spending needs. While the DMO released a rejoinder noting that the necessary approvals for issuance have not been received at this time, we believe issuing Eurobonds will be beneficial to the country.

In a recent release by J.P. Morgan, it was forecasted that there will be an imminent interest rate hike by the Central Bank of Egypt, with an expectation of an additional 200 basis points later this month. In February, the inflation rate rose to 35.7%, posing significant challenges to the economy. The Central Bank of Egypt issued treasury bills worth 60 billion Egyptian Pounds to finance budget deficits; these bills, with maturities of 182 and 364 days, carry interest rates exceeding 32%, reflecting the aftermath of the recent 600 bps interest rate hike. J.P. Morgan’s projection suggests a proactive approach by the Central Bank of Egypt to tackle inflationary pressures through monetary tightening measures.

Recall that about three (3) weeks ago, on February 26th 2024, the Nigerian government arrested two executives of Binance who were in the country to resolve the ban on the company’s website. According to reports, they were set for release on Tuesday, March 12 2024, after a court order. However, according to online sources such as Sahara Reporters and CoinDesk, it was reported that these executives are still in detention as an appeal preventing their release has been filed with the court. Latest reports have indicated that the Nigerian government is seeking information from the detainees on the top 100 Binance users in the country, in addition to further information, including a six-month transaction history.