Nigerian banks are currently finding it extremely difficult to mobilise deposits from institutional investors such as Pension Fund Administrators and insurance companies as well as individuals due to the attractive treasury bills yields.

The increasing awareness of the opportunities in the treasury bills market is seeing a lot of banks lose deposits to fixed income investments.

This is because most investors and bank customers now benchmark interest rates on term deposit against treasury bills rates.

THISDAY findings showed that those affected most are the Tier 2 banks as they are finding it difficult to meet the demand of the fund holders. But the Tier 1 banks are not under such pressure, THISDAY learnt.

The cash squeeze in the market clearly manifested in the interbank lending rate which increased to 23 per cent on Friday from five per cent the preceding Friday.
The Nigerian Treasury Bill currently offers a unique investment opportunity to Investors. It offers security and guaranteed premium returns to its investors.

Last week, the 364-day instrument offered by the Central Bank of Nigeria (CBN) recorded excess subscription to the tune of N91.1 billion, whilst the CBN allotted N136.5 billion at a stop rate of 18.5 per cent relative to the offered amount of N120 billion.

The 91-day (offer amount: N29.1billion; subscription: N26.1 billion) and 182-day (offer amount: N80 billion; subscription: N69.75 billion) instruments were however undersubscribed, whilst the CBN allotted N23.2 billion and N69.57 billion at stop rates of 13.4 per cent and 17.4 per cent respectively.

An analyst at Ecobank, Mr. Kunle Ezun, who confirmed the situation in the money market, said the banks are feeling the brunt now.

“A lot of the PFAs, insurance companies and individuals are not willing to do term deposit again. They prefer doing treasury bills.

“If they do term deposit, they get around seven per cent interest. But they can get as high as 18 per cent from treasury bills. A lot of the banks today are losing deposits because of this.
“What the PFAs are saying is that if you cannot match treasury bills, bring back my money. Individuals are also saying: if you can’t give what treasury bills will give me, I am not going to save money with you.
“If banks don’t have deposits, they can’t give loans. The few banks that are ready to match treasury bills rates are doing that at a cost.”


The Chief Finance Officer, Wema Bank Plc, Mr. Tunde Mabanwoku, also confirmed the challenge currently faced by the Tier 2 banks.

Mabanwoku explained: “What we see now is that customers are increasingly benchmarking treasury bills rates. So, when customers come in that they want to do fixed deposits and you tell them its 12 per cent, they would be comparing what you tell them with treasury bills rates.

“So, customers are becoming a lot more aware of what is happening out there and they are saying if they can put their money in treasury bills at 17 per cent, why should they put their money in a bank at 12 per cent.
“So, banks have had to increase their cost of deposits just to match or get close to the sovereign rate.”

Also, the Managing Director, Afrinvest Securities Limited, Mr. Ayodeji Ebo, disclosed that owing to the opportunities in the treasury bills segment, foreign exchange speculators who had converted their naira to the dollar are now re-converting the greenback, back to naira in order to invest in fixed income securities.

He said those that doubted the ability of the central bank to sustain its intervention are now convinced that the banking sector regulator has enough ammunition to sustain its foray in the market.

He said: “People have been observing the development in the forex market. We have observed for over four months, the CBN has continued to emphasise that they would continue to intervene.

“In addition to that, despite the frequent intervention by the CBN, the reserves have also not been depleting. So, that has boosted confidence.

“Also, if you look at the volume of transactions in the Investors and exporters’ window, that has also increased and we have seen banks now re-introduce their naira cards for dollar transactions.

“So, those people that were trying to take arbitrage opportunities, especially those that entered when the dollar was as low as N400-N500, are trying to cut their losses by investing in risk-free investments like treasury bills. Luckily for them, the interest rate is also very high.”
Nigeria’s external reserves stood at $30.927 billion as at August 3.

http://www.thisdaylive.com/index.php/2017/08/07/banks-in-dilemma-as-customers-investors-shun-deposits-for-treasury-bills/

Ok

Hmmmmm

Check my signature for ongoing promo of our full capacity powerbank

Good for investors.

Try us, Please. Treasury bills can't offer what I am about to give you..

I will give you 10% on your investment monthly and ensure you have a LIFE cover if anything happens to you while your money is with us.. God forbid!

Save your cash, save your LIFE!

Expert opinion needed

FunmyKemmy:
Good for investors.

N we shld be ready 2 face d multiplier effects on d economy

Can someone please explain, the whole thing looks gibberish to me

Thanks to apshit govt
govt of failures
govt by trial and error
govt of artificial injection

That's the only thing a logical investor will do.

You give ur monies to a bank (time deposit) and you get 5% return, while they get 18% from CBN by investing in treasury bills.

I don't understand

Rexphobia:
That's the only thing a logical investor will do.

You give ur monies to a bank (time deposit) and you get 5% return, while they get 18% from CBN by investing in treasury bills.

are you serious....

18%per month from CBN. ?

throw more light if you don't mind

magoo10:
Thanks to apshit govt
govt of failures
govt by trial and error
govt of artificial injection

Did you read the report? Just asking.

If you didn't, pls do, but if you did, then do again, but slowly the second time.

skarlett:
Can someone please explain, the whole thing looks gibberish to me

Do you wanna invest your money?..

I will list all the options, then you can choose.

nextprince:

Did you read the report? Just asking

Yes I did ,the financial system is sick.
there is problem somewhere

Rexphobia:
That's the only thing a logical investor will do.

You give ur monies to a bank (time deposit) and you get 5% return, while they get 18% from CBN by investing in treasury bills.

True.

I am wondering. What did they think a rational investor would do? Depositing money in a Bank to get 7% means you are actually loosing 18 - 7% = 11% of your money in opportunity costs.

Anikulhapo:
I don't understand

Customers place money in T-bills because it offers higher returns than fixed deposits in banks. You can buy T-bills thru banks

nextprince:

Did you read the report? Just asking.

If didn't, pls do, but if you did, then do again, but slowly the second time.

northvietnam:



are you serious....

18%per month from CBN. ?

throw more light if you don't mind

The rates I quoted are annual rates i.e 18% p.a.....18% per month ke ? no be MMM naw

magoo10:

Yes I did ,the financial system is sick.
there is problem somewhere

Pls read it again, this time, slowly.

I'm bidding this Wednesday definitely.

My stock broker is taking 1%, whilst i go with 17.5%

Rexphobia:
That's the only thing a logical investor will do.

You give ur monies to a bank (time deposit) and you get 5% return, while they get 18% from CBN by investing in treasury bills.

Have you ever needed your money before maturity date? Banks come in handy here.

dunkem21:


Have you ever needed your money before maturity date? Banks come in handy here.

You can still sell your bills before maturity (you will be charged penal fees sha). You can also play in the secondary market where you buy treasury bills with your preferred maturity...45 days, 13 days...

northvietnam:



are you serious....

18%per month from CBN. ?

throw more light if you don't mind

Find something better to do with your money

abfalkolly:

N we shld be ready 2 face d multiplier effects on d economy

What is the contributon of the corrupt banks to the economy before, they were just robbing peter to pay paul, the will mobilise local deposits from nigerians,and instead of lending back to the same nigerians to help grow nigerian business, they prefare to lend to the indians ,the lebanese and the chinese who will latter defraud just because of the kick back they will collect, a case in point is the shameful etisalat deal, there other numerous stupid deals like that with the foreigners at the detriment of nigeria.so kudos to the discerning investors and depositors, let the banks go and sweet for the money they will lend to foreigners they so much love to favour.

northvietnam:



are you serious....

18%per month from CBN. ?

throw more light if you don't mind

Kindly note also that the rate fluctuates and could fall anyday..

Happy investing

skarlett:
Can someone please explain, the whole thing looks gibberish to me

It says instead of putting your 1million naira in Bank Fixed deposit to get 5% interest which is 50k, people are now buying Treasury bills which is around 18% interest that's about 180k in 60days

abfalkolly:

N we shld be ready 2 face d multiplier effects on d economy

Explain what you mean by multiplier effect on the economy
The fear before now has been that the frequent intervention by the CBN will affect our external reserves but so far, so good that school of thought has been proven wrong. So that to me means the CBN are up with their game.
Secondly, it's a good thing Nigerians are getting more enlightened, the banks will be on their toes to create better investment packages. Before now banks have access to easy money, they were not been innovative enough.
So, generally I feel this is a good development for the country..banks must create better investment offers and be able to woo investors. There must be competition for development to occur.

Is there anyone who have attended interview with a company called "Dove Green Global Services" before? How is about the company? Please, I need these pieces of information. Thanks

CarlosTheJackal:
It says instead of putting your 1million naira in Bank Fixed deposit to get 5% interest which is 50k, people are now buying Treasury bills which is around 18% interest that's about 180k in 60days

Oh wow, that's really cool

So Tier 2 banks are not comfortable with this development, yeah

ip2121918021:



Find something better to do with your money

yes, the real rate of return is negative...but treasury bills rates are closer to inflation rate so it is still the preferred option between term deposits and tbills.

You will also notice that the investors referred to in the article are institutional investors seeking for risk free investments.

Please somebody should helep me read, summarize and provide literature review abeg........

I put beans for fire, make E no go burn......

Bag of beans now #45,000........

Modified:
Of which, E don come down to #45,000. As at a month ago, na #50,000..........