…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
