…As CBN raises N284.26bn from T-Bills auction
…Stops forex price verification system for importers
By Charles Ebi
Governor of the Central Bank of Nigeria, CBN, Mr. Olayemi Cardoso, has said that the Bank will continue to collaborate with relevant financial institutions, the fiscal authorities and the National Assembly to ensure a successful recapitalisation exercise, including providing adequate protection of property rights and interests of minority shareholders.
Cardoso made the pledge in London, while speaking to stakeholders on “The Impact of the Recapitalisation of Nigerian Banks” at the UK-Nigerian Chamber of Commerce.
The Governor, represented by the Bank’s Deputy Governor, Financial Systems Stability, Mr. Phillip Ikeazor, emphasised the event’s significance and restated the CBN’s commitment to fostering stronger, healthier, and more resilient banks capable of withstanding economic shocks and supporting the Government’s goal of achieving a $1trn economy by 2030.
According to him, the anticipated impact of the recapitalisation programme will include an increase in banks’ lending capacity, a boost in the volume of foreign direct investment ,FDI, and an increase in foreign exchange liquidity.
He said the exercise would also contribute to GDP growth, better risk management, improved credit ratings, a diversified ownership base, better governance and strategic decisions, and increased market volume and value, leading to a more vibrant equity market.
“With the recapitalisation programme, our goal is to trigger the emergence of stronger, healthier and more resilient banks”, he added.
He noted that several factors influenced the new minimum capital requirements, including macroeconomic conditions, stress test outcomes, and the need for improved risk management.
“We will rigorously enforce our “fit and proper criteria” for prospective new shareholders, senior management, and board members of banks, and proactively monitor the integrity of financial statements, adequacy of financial resources, and fair valuation of banks’ post-merger balance sheets”, Cardoso assured.
He noted the significant opportunity it presents to engage investors, policymakers, and technocrats on the critical issue of bank recapitalisation in Nigeria.
Cardoso explained that since his assumption of office in October 2023, his priorities at the CBN have included achieving monetary and price stability, maintaining a stable exchange rate, controlling inflation, and creating an enabling environment for businesses.
In the same vein, the Central Bank of Nigeria ,CBN, raised N284.26 billion from yield-hungry investors in its latest Nigerian Treasury Bills ,NTBs, auction on Wednesday, June 26, 2024.
According to the auction result by the Debt Management Office ,DMO, the auction attracted significant investor interest, with the total subscription amounting to N773.98 billion, far surpassing the total offer of N228.72 billion.
As an instrument to implement monetary policy, the CBN can control the money supply in the economy by issuing or redeeming Treasury Bills ,T-Bills. Also, T-Bills provide a means for the government to raise short-term funds to finance its operations, including bridging budget deficits.
In the latest auction, there was an increase of 417.1% in the amount offered when compared to the N44.23 billion offered in the previous auction, which was held on June 13, 2024.
Also, total subscriptions recorded 89.8% increase from N407.76 billion while total sales rose by 414.7% from N55.23 billion.
The latest auction saw a significant subscription rate, surpassing the offer amount across all tenors, indicating robust demand from investors.
The auction featured three tenors: 91-day, 182-day, and 364-day bills.
The 91-day tenor, maturing on September 25, 2024, had an offer of N29.83 billion but received subscriptions worth N36.29 billion, with an allotment of N28.15 billion. The range of bids for this tenor was between 15.98% and 24.00%, with a stop rate of 16.30%.
The 182-day bills, maturing on December 25, 2024, saw an offer of N30.67 billion against subscriptions of N40.58 billion, and an allotment of N36.44 billion. The bid range was between 17.00% and 21.00%, with a stop rate of 17.44%.
The 364-day bills, maturing on June 25, 2025, had the highest offer at N168.21 billion. It recorded an overwhelming subscription of N697.11 billion and an allotment of N219.67 billion. The bid range for this tenor was 16.00% to 25.00%, with a stop rate of 20.68%.
The significant oversubscription across all tenors demonstrates strong investor confidence in Nigerian Treasury Bills as a safe investment avenue amidst prevailing economic conditions.
The high subscription rate, particularly for the 364-day bills, reflects a preference for longer-term securities, likely driven by expectations of future economic stability and favourable returns.
The range of bids and the stop rates across the different tenors suggest competitive bidding, with investors keen on securing these government securities.
The stop rates indicate the yield investors are willing to accept, and the competitive rates achieved in this auction are indicative of the NTBs’ attractiveness.
Nigeria recorded a total NTB debt of N10.4 trillion in the first quarter of 2024, a 60% rise in just three months.
This surge occurred as the DMO, via the central bank, issued several T-Bills in Q1 2024 as it relies on a combination of monetary and fiscal policy to fight inflation while also providing a source of funding to meet the government’s short-term expenditure.
In a similar development, the Central Bank of Nigeria has stopped the foreign exchange ,FX, Price Verification System ,PVS, portal used by importers ten months after introduction.
The apex bank disclosed this yesterday in a circular signed by the Director of Trade and Foreign Exchange Department, J. Kanya.
The PVS portal was introduced in August 2023 and was mandatory for all Form M requests.
But in the fresh development, the apex bank said importers would no longer need the portal to validate Form M applications from July 1.
The CBN said, “We refer to the circular dated August 17, 2023, referenced TED/FEM/PUB/FPC/001/008 and titled Price Verification System Portal’ on the deployment of the Price Verification System ,PVS.
“Given recent developments in the Nigerian Foreign Exchange Market, the CBN hereby discontinues the Price Verification System ,PVS.
“Consequently, with effect from July 1, 2024, all applications for Form ‘M’ shall be validated without the Price Verification Report generated from the Price Verification Portal.
“For the avoidance of doubt, by this circular, the Price Verification Report is no longer a requirement for the completion of a Form ‘M”.
Recall that the CBN introduced the PVS portal to check overpricing of imports and underpricing.
When it was first introduced, the system flagged any declared prices of import items exceeding global average prices by more than 2.5%.
But the limit was expanded to a range of -15% to +15 per cent rise in the allowable limit for price verification.
