Dec 14 (Lagos) - Nigeria’s one-year treasury bill yield rose about one percentage point to 10% on Wednesday, continuing a rebound from the previous day’s dive to 7% after the government said it would repay N 198 billion (US$ 549.5 million) of debt this month to cut its costs.
That yeild goes up to 13%, expect the hot money to pour into T-Bills again.
That announcement by the DMO caused panic among investors and banking stocks fell sharply because currently the way banks in Nigeria make money is by investing in T-bills.
It is important for the Federal Government to reduce its interest expense and that is the main reason for their decision to redeem these T-Bills in full.
Now the crude oil price is rising, and Federal Government is in a more comfortable position with external reserves near the $ 40 billion mark.
Banks will have to increase lending very soon and return to traditional banking models as the days of buying T-Bills and resting and coming to an end.
The Monetary Policy Committee of the CBN is expected to lower interest-rates next year and that will put more pressure on Banks as they will have to charge lower interest rates.
At the same time lower interest rates are good news for manufacturing Companies as their borrowing costs go lower.
The money from maturing T-Bills will likely enter the stock market in the new year, so investors have to be careful of what they buy. The bull run will return in 2018 so its all about positioning yourself to benefit from it.
reporting for easykobo.com on Thursday, Dec 14 2017 from Lagos, Nigeria
If you would like to post comments! Please log in.