Connect with us

Hi, what are you looking for?

E-Financial

CBN Blocks Banks, Investors from N622Bn Illegal Earnings

Central Bank of Nigeria (CBN), has effectively obstructed about N622 billion interest earnings that would have accrued to banks and other individual and corporate investors in the money market.

This was done through the apex bank’s new Treasury Bills policy.

Recall that the CBN had last November directed banks and other financial institutions to stop selling treasury bills to individuals and small firms.

Before that announcement, banks had mobilised their customers to invest in the treasury bill at mouth watering yields (interest rate) shortly after the apex bank increased the Loan-to-Deposit Ratio (LDR), requirement to 60percent in September last year.

Instead of lending to real businesses as required by the new LDR directive, banks embarked on aggressive loans to individuals and companies for investment in the NTB to meet the CBN’s LDR requirements.

In response to this the CBN tweaked its NTB policy last year cutting off local investors, individuals and corporates, from investing in NTB through the Open Market Operations (OMO) auctions.

Consequently, the interest cost which the apex bank pays to the investors has recorded a massive crash in the first half of 2020 to N675 billion as against N1.3 trillion it dolled out to the investors before the policy (in the first of 2019, H1’19), leaving a balance of about N622 billion that would have gone to the investors.

The blocking of the investors from the OMO segment of the NTB also resulted in a huge decline in the volume of transaction in the instrument.

Financial Vanguard investigations revealed that the ban has triggered a 45 percent year-on-year (YoY) decline in the volume of OMO NTBs issued and sold by the CBN, in the first half of the year (H1’2020).

According to the apex bank, OMO NTBs issued during the period fell by 45 percent YoY to N6.39 trillion and N6.45 trillion in H1’2020 from N11.85 trillion and N11.83 trillion respectively in H1’19.

Also reflecting the impact of the exclusion of local investors from OMO auctions, demand for OMO NTBs (public subscription) fell by 34 percent, YoY, to N8.57 trillion in H1’2020 from N13.05 trillion in H1’19.

This trend continued in July and August, with OMO NTBs issued during the two months falling by 81 percent, YoY to N231 billion from N1.24 trillion in the corresponding period of 2019.

Similarly, OMO sales fell by 74 percent, YoY, to N218 billion in July and August, from N855 billion in the corresponding period of 2019.

During this period, demand for OMO bills also fell by 83 percent, y/y to N512 billion from N3.05 trillion in the corresponding period of 2019.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Advertisement

advert
nis
ad

You May Also Like

Tech

Techeconomy, a Lagos-based media startup, has announced the launch of Techeconomy Business Series [TBS]. The startup which offers its readers Content-as-a-Service (CaaS) by telling...

Politics

Rivers State Governor, Siminalayi Fubara, has sworn in the newly elected council chairmen” of the 23 local government areas. The exercise took place on...

News

Thuraya, a leading provider of satellite communication solutions, has officially relaunched its services in Nigeria, a move the federal government hope will help in...

Broadcasting

Celebrating excellence in leadership: Mojisola Ologe, a recognized risk management professional, has won The Peak Performer FEST 2024 Admirable Woman in Leadership Award. The...