Nigerian bond yields spiked across the curve on Wednesday after the central bank unexpectedly tightened monetary policy in an about-turn to curb inflation and attract foreign investors.

The Central Bank of Nigeria (CBN) yesterday raised its benchmark rate to 12 per cent from 11 percent, having cut rates only four months ago by 2 percentage points, and lifted the cash reserve ratio for commercial banks to 22.5 per cent from 20 per cent.

Yields on the benchmark 20-year bond rose 55 basis points (bps) to 12.7 per cent while the 10-year yield climbed 45 bps to 12.65 per cent. The yield on five-year paper, the most liquid maturity, gained 41 bps to 11.7 per cent.

“The MPC has signalled a tightening and rates have gone up. Lenders can place their funds with the central bank at 7 percent so why buy treasury bills at lower yields?” one trader said.

CBN governor Godwin Emefiele, said extra liquidity had not translated into more lending and cited inflation, at a 3-1/2-year high of 11.4 percent last month, and well above the central bank target of 6 per cent to 9 per cent.

Nigeria is going through its worst economic crisis for years due to a slump in crude prices which has weakened its naira currency and slashed government revenue. Oil exports account for about 70 per cent of national income.

Banks were quoting 10 per cent on the interbank overnight lending market, a jump from yesterday’s 4.8 per cent before the central bank rate decision.

There were no deals on Wednesday.

The stock market, which has the second-biggest weighting after Kuwait on the MSCI frontier market index, bucked two day of gains to shed 1.19 per cent, as domestic funds switch to bonds, traders said.

Traders estimated the new cash reserve requirement will soak up between 350 billion and 400 billion naira. The central bank is also selling N114.97 billion in treasury bills to further drain liquidity.

The central bank vowed to keep the exchange rate stable despite sharp falls on the black market – some 40 percent below the official rate – due to a shortage of dollars.

“Part of the central bank’s intention in the rate hike is to attract foreign portfolio flow (FPI). However, I do not think this will be achieved because the forex policy is unchanged. Until this happens, we will see very little FPIs,” Vetiva Capital’s head of research, Pabina Yinkere, said.



http://leadership.ng/business/511840/nigerian-bond-yields-rise-rate-hike-aimed-luring-investors

Ok.

Just Negodu!

The summary and meaning bikonu!

All these economic rise and falls eeh, can't we attain an economic equilibrium?

.

Ok

God help our economy. This hardship is getting Unbearable.

I don't understand this big Grammar

I blame buhari

click like if you didn't understand the economic jargons
click share if you claim to understand buh deep down your heart...you don't understand shit

Use ur dico

Story story












Till I see the positive effect here, all na scam

Another grammer....

APC and lies, just like: buhari and cows;

tunubu and mouth odour;

fashola and bill increase

aregbesola and debt

ameachi and thuggery

They are just inseparable...

PMB the olodo of daura.

Sumtyms I tink our CBN shud be scrapped n replace wit Osusu banking.

Non the less, Nigeria will be great

We getting there gradually.

Just passing by

The number of comments here and the direction of the comments are a pointer to the quality of our youths who call themselves leaders of tomorrow. Lazy dolts everywhere you go.

Smh......@ posters above, how will you understand?

If it had anything to do with Buhari, you would have understood.

make i book space before i enter 2nd page

Take note of the last two sentences.


As far as the forex policies remain unchanged, all this will not work.

Any economist in d ouse pls explain

All Join...

jesse515:
PMB the olodo of daura.

Sumtyms I tink our CBN shud be scrapped n replace wit Osusu banking.

Non the less, Nigeria will be great

You don't have to be a jenious to be a leader , all you need is good judgement of characters around you and know what is going to favour your people and have the Selfless attitude towards leadership Buhari has that Jonathan doesn't call him what ever you want he is a brilliant man in his own way.

tobimillar:
I don't understand this big Grammar

same here

This bond is btn d investor,contractor,insurance and d bank. Esp in bid bond or counter performance bond and APG

Foreign investor X comes with $1000 to invest at a rate of 12%

X makes $120

Total (120 + 1000) = 1120 @ 199 to a dollar making N222,880

Here's the interesting part.

X wants His money back in dollars and CBN won't trade.

Parallel market rate @ 325 gives you $685.7 (222,880 / 325)

Has X made a wise investment as a foreign investor? You bring in 1000 and go back with 685

Sunnycliff:
All these economic rise and falls eeh, can't we attain an economic equilibrium?

Not possible, no country can ever be at equilibrium. When tried with the laissez faire policy, led to the great depression. Even the forces of supply n demand inhibits fluctuations

I thought as much.

However, I hope this hiked interest rate won't affect the level of domestic investment adversely as they both have adverse relationship. I also hope that this will attract enough capital inflow to improve our alarming balance of payment deficit! as well as stop our foreign reserve depletion and lessen the present pressure on naira!

slimfit1:


You don't have to be a jenious to be a leader , all you need is good judgement of characters around you and know what is going to favour your people and have the Selfless attitude towards leadership Buhari has that Jonathan doesn't call him what ever you want he is a brilliant man in his own way.

Hehehehehe, wetin concern me concern GEJ? All I knw is dat ur PMB is olodo. D man na mumu

This rate hike won't still attract FPI , if a dollar is still at 300 or so @Parallel Market

georjay:
click like if you didn't understand the economic jargons
click share if you claim to understand buh deep down your heart...you don't understand shit

None of the above.
I got the message clearly.

Make I explain?

All that is being said is that money is too much flowing in the economy which is giving people the liberty to buy dollar in an alarming rate for various reasons legitimate or not. Therefore, those money will be withdrawn through some instruments such as mentioned I.e. the treasury bill and bond. What is been done is to sell those things to the public or investors to buy at more profitable rate (that is the figures you see there) so more people will be enticed to buy, making the monies unavailable for public spending but with the CBN. Though the CBN have to payback which will be in the years mentioned or when CBN decides we no longer have enough money to spend.

So now, it is expected that the price of dollar should go down since people won't have much money to run after dollar as before.

My learned opinion is that this will only reduced this problem a bit as the problem at hand is not about people having too much money to import (or otherwise) but the need to import itself, further made worse by the absence of enough export. And this I believe is known to everyone. A little fall in exchange rate is however appreciated at this critical time.