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The auction suggests the central bank is seeking to normalise interest rates in Africa’s most populous nation and lure foreign investors in a bid to stabilise the naira.
Nigeria’s central bank hiked the interest rates on short term debt obligations on Wednesday in a bid to mop up naira liquidity and attract foreign investor inflows.
The Abuja-based Central Bank of Nigeria sold one trillion naira (US$696 million) in treasury bills to both local and foreign investors at rates that were nearly twice the level of previous offers. Yields for the one-year bill rose to 19%, the highest in 12 years, from 115 percent at the previous auction on January 24.
Three-months bill was sold at 17,24 percent, which was three times more than the January offer of 5 percent, while six-month notes fetched 18 percent.
The 19 percent rate on the 364-day bills takes it above the central bank’s policy rate, which currently stands at 18,75 percent, for the first time. It also narrows the gap on the inflation rate, which stood at nearly a three-decade high of 28,9 percent in December.
The auction suggests the central bank is seeking to normalise interest rates in Africa’s most populous nation and lure foreign investors in a bid to stabilise the naira.
Nigeria has eased currency controls and introduced a series of reforms since last week as part of efforts to reform its foreign exchange market to ease a dollar scarcity that has created a backlog of unmet demand estimated at US$2,2 billion by the central bank.– Bloomberg
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