…FG to redeem N139.6bn Treasury bills, bonds …as CBN set to auctions N48.6bn T-bills this week***

The Governor, Central Bank of Nigeria, Mr Godwin Emefiele, on Monday said the recent measures announced by the apex bank to revive the Cotton, Garment and Textile sector was well thought out to reposition the sector for job creation and economic growth.

Emefiele was replying to the position of the Lagos Chamber of Commerce and Industry cautioning government over the restriction of foreign exchange for the importation of textile materials.

The LCCI Director-General, Muda Yusuf, had said that there was a need for a strategic approach before such policy pronouncement should have been made.

He had advised the Federal Government to reconsider the Central Bank of Nigeria’s ban of forex to textile importers.

He argued that given the position of Nigeria in Africa as a leader in fashion, the range of fabrics produced by the Nigerian textile industry could not support the industry in terms of the quantity and quality.

Yusuf, who noted that his submission was not to diminish the importance of the local textile industry in any way or the significance of the nation’s industrialisation, however, added that this was to underscore the importance of a strategic approach to industrialisation.

The LCCI DG said before such policy pronouncement, the government ought to have strengthened the capacity of domestic industries, enhanced their competitiveness and reduced their import dependence as espoused in the Nigeria Industrial Revolution Plan.

But reacting to the position of the chamber, the CBN governor said the strategic approach being referred to by Yusuf had never worked.

He said, “The issue he raised here is that we need to have a strategic approach to the measures. Whereas one will agree with his view on strategic approach, but I begin to wonder what Muda means when he talked about strategic approaches.

“In the past, the country has adopted what he calls a strategic approach and that strategic approach to my understanding is that he seems to say allow them to continue to import, let them continue to dump, let them continue to smuggle into the country, they will build these factories and industries

“When we address these issues three weeks ago, I had said that at a time in this country, Nigeria had 180 textile mills, today they are dead. Three weeks ago when we held a meeting, there were only 15 textiles companies out of the 180 in the 50s and 60s in the country.

“Jobs have been lost, and that is why we know that while there is unemployment in our country, we ignore an industry that is the largest employer of labour after the public sector.

“The strategic approach had never worked. I want anybody to quote me; it has never worked. What is the policy we are talking about? Increase in duty. Today, duty on textile is 45 per cent.

“I have data here that tell me that textile officially imported into Nigeria in 2015 was  $9m. In 2016, $6.9m; in 2017, $7m; and in 2018, $9.7m. Is that the quantity of textile that came into Nigeria? My answer is no. And yet people say they pay duty, my answer is no. Because if you paid duty, then we will not have a record that places import of textile into the country at $9m.

In the meantime, the Federal Government is expected to redeem N48.6bn Treasury bills and make N91bn bond coupon payment this week to bolster system liquidity.

The Central Bank of Nigeria is also scheduled to auction N48.6bn worth of Treasury bills this week in a primary market auction.

The CBN conducted an Open Market Operation auction once last week, which was on Thursday and offered a total of N350bn across the short – and medium-term maturities, that is the 91-day and the 175-day maturities.

The 91-day and 175-day bills were oversubscribed by 1.1x and 1.2x, respectively leading to a decline in the stop rates by six basis points and 24bps, respectively.

At the primary market auction last week, there was high demand across the 91-day, 182-day and 364-day maturities, which were oversubscribed by 2.9x, 3.3x and 7.7x, respectively.

As a result, stop rates across all three tenors declined with the CBN fully allotting N89.5bn (the total volume offered) across the board.

The Treasury bills secondary market, thus, maintained its bullish sentiment last week largely due to the huge volumes of lost bids at the primary market auction, following lower-than-expected stop rates, as well as the continued absence of long-term OMO bills.

Consequently, average yields across all tenors declined by 19bps week-on-week to close at 13.3 per cent on Friday.

Major buying interests were recorded at the medium and long-ends of the curve, particularly the 18-Jul-19, 08-Aug-19 and 02-Jan-20 maturities.

However, sell-offs of the 28-Mar-19 and the 04-Apr-19 buoyed yields at the shorter end of the curve.

Analysts at Afrinvest Securities Limited said they believed that there would also be a strong demand at this week’s primary market auction, particularly at the long-end of the curve (the 364-day tenor) as investors locked in their funds in anticipation of further rate decline, predominantly if there would be no OMO auctions with long-term offers on Monday and Tuesday.

They said, “Investors are, therefore, advised to take advantage of the long-term primary market auction offer as well as selected secondary market bills as the apex bank has only offered short – and medium-term OMO bills in recent times.

“We expect buying interests by local and foreign investors, particularly at the medium-to long-end of the curve to persist, thereby pressuring yields downwards amidst reduced OMO auctions and the absence of long-term OMO bills.

“We also maintain that the stop rates at the PMA would guide rates obtainable on similar bills at the secondary market.”

Punch