The purpose of TB is to raise funds amongst other things..for Budget expenses of govt.
If the purpose is realized, then why offer more rate of returns for investors?

But in the meantime. Why will you shift goalpost in the middle of a game?

CBN is Cheating.
Someone should stop them.
I mean, this erodes investors confidence.

chloride6:


The benchmark cost of borrowing money has reduced...

So answer yourself is this good..

True, you can't desire low rates on loans and higher returns from the government at the same time. We want to borrow money from the government at very low rates, and invest same with government for big returns. More like robbing both Peter and Paul to pay Ceaser.

High interest rates on Treasury Bills reflect on the Government's credit worthiness and investors confidence in the Nigeria remaining stabke

e.g 6 years ago $1 was 180 now it is 360 so if you had invested one million dollars in the Nigerian economy on T-bills @ 10% in 2013
you would by now be in negative.

So high rates indicate weakness .

Lower rates could indicate that the government now has access to cheaper credit perhaps because investors are desperate and have nowhere to park their money or perhaps because the government is fiscally stronger and has less need to borrow. or even a combination of both factors

We must remember that the government borrowing i.e. T bills rate is the lowest rate of borrowing in the economy . Other borrowers would pay a lot more than what the government pays and so one would hope that this would translate into cheaper credit for everyone especially businesses

Even with the reduction the rate is still too high for businesses to prosper especially when compared with foreign actors.
Investors in the EU and US have access to credit under 2% . Imagine an American company that enters Nigeria with capital it borrowed at 2% interest. How can a local business compete?

For me this is a good start but what is the strategy ? Is it a random move or is it part of a strategy to lower rate going forwar and what is the target rate?

This is very bad news. From the OP information, the TBills were oversubscribed; the reason for this oversubscription is because the only safe place for people to invest now is in the government.

Money is not meant to be idle, money is supposed to work and bring profit.

Now, our borders are closed, people with money are afraid to do business (import/export); the fees charged by ports authorities and customs have skyrocketed. If a business engages in imports/exports, the final cost of goods will be very high for end user; this the fear to engage in the business so as to avoid wasted goods.

In addition, banks are not ready to invest in businesses, due to fear of bad loans. Businesses are not thriving in this economic atmosphere, lots of double taxation, lack of consumer spending, everyone is afraid of tommorow.

Furthermore, the Nigeria Stock Exchange is currently in a mess now, stock have plummeted; Dangote Cement is preparing a buyback of their stocks, Otedola has exited Forte Oil. Who wants to loose more money?

This makes TBills the only save Haven for investment. By the time, the federal government defaults in paying treasury bills, then we will know that this government never meant well for the people of Nigeria.



This is my small comprehension of the news.

It is a good monetary policy which is good for an economy in distress like Nigeria.

VicThory:
Is it for good or bad?



I don't understand


lalasticlala


mynd44

tiwiex:

Once you invest at a rate, it stays that way. It's to discourage new investors or let them know the song has changed.

oh, i get it now

urahara:


Higher demand on treasury bills , causes interest rate to fall.

thanks for the enlightenment, clearer now

For those that wants alternative to TB or Fixed deposit with good interest rate .

I work with a Non- banking financial institution called Rosabon Financial Services ( The Concept Group ) 32 Montgomery Road Sabo Yaba with a branch in Abuja ,PH & Warri licensed and regulated by CBN and also been in existence for over 25 yrs now. our interest rate still remain unbeatable, fantastic and far better than what all the commercial banks are giving out presently. For 1M is actually 12.5% per annum for 90days and is still open to negotiation. You can get your interest Upfront , Monthly or @ Maturity. The longer the tenure , the higher the interest rate. You may contact me if you are interested. 08036450638 or a.abatan@rosabon-finance.net or www.rosabon-finance.com

you can also earn commission on referral or Join our Broker Program today and earn as much as 1.75% on every Treasury or Lease Transaction that you generate.Thanks

statusquoante:


True.

But it seems 'everyone' are actually not the target of this policy... It's those who should be investing big time in businesses but have decided to be indolent via TB.

Maybe CBN should peg principal for TB so that only 'everyone' can partake...

/
Do you really believe that Nigeria as constituted cares for everyone?

They know themselves. Why go through the hassle of business in a country like Nigeria with her volatile business policies when the money could quietly be working for you hassle free?

/

Bad news
It is bad news for investors. With this development you now get much lesser returns on the amount you invest in treasury bills. If care is not taking investing in treasury bills will soon lose its attractiveness.

Good news
For small and medium enterprises that offer more attractive returns. I belong to one of such, and they pay between 15 and 30% based on negotiation and agreement signed by the investor's lawyer and the company's lawyer.
It is also good news for CBN because now they will have more of the ROI to hold onto after cutting the rates.
Also good news for commercial banks, and for the stock market. I expect them to get more investors buying up fixed deposit, shares and like products. The same for insurance companies and pension fund managers that have savings portfolios.


So for the country, it's both good and bad news depending on where you fall.

VicThory:
Is it for good or bad?


I don't understand

This is bad oo... single digit no help anybody na...


If I invest 1m na chicken change go climb ontop for 8 months...lubbish

I SO MUCH LOVE THAT, EVERY LAZY MEN NOW DO TREASURY BILL INSTEAD OF INVEST THE MONEY TO CREATE MORE JOB AND EMPLOYMENT. A N1M PUT IN USE INTO A RIGHT BUSINESS WILL BRING YOU MORE THAN 20% ROI AND SAME N1M WILL TAKE AT LIST 2 HOME OUT OF LABOUR MARKET, BUT WHAT PEOPLE DO IS TO GIVE THE MONEY TO FEDERAL GOVERNMENT IN THE NAME OF TREASURY BILL. KUDOS TO GOVERNMENT MONETARY REGULATORS ON THIS, THEY SHOULD FURTHER SCRATCH DOWN THE RATE TO 1% TO DISCOURAGE PEOPLE FROM DINING TB. THERE ARE THOUSAND AND ONE THINGS TO INVEST YOUR MONEY INTO, BUT SOME BLIND PEOPLE WONT SEE THE OPPORTUNITY.

What is the implication of this news and how does it affect the common man?

Good news, take your money off the banks and invest it.

Invest it In productions and services

DEBJOCH1:
I SO MUCH LOVE THAT, EVERY LAZY MEN NOW DO TREASURY BILL INSTEAD OF INVEST THE MONEY TO CREATE MORE JOB AND EMPLOYMENT. A N1M PUT IN USE INTO A RIGHT BUSINESS WILL BRING YOU MORE THAN 20% ROI AND SAME N1M WILL TAKE AT LIST 2 HOME OUT OF LABOUR MARKET, BUT WHAT PEOPLE DO IS TO GIVE THE MONEY TO FEDERAL GOVERNMENT IN THE NAME OF TREASURY BILL. KUDOS TO GOVERNMENT MONETARY REGULATORS ON THIS, THEY SHOULD FURTHER SCRATCH DOWN THE RATE TO 1% TO DISCOURAGE PEOPLE FROM DINING TB. THERE ARE THOUSAND AND ONE THINGS TO INVEST YOUR MONEY INTO, BUT SOME BLIND PEOPLE WONT SEE THE OPPORTUNITY.

If the economic policies and environment were encouraging, people wouldn't be scrambling for 10% or 12% per 365 days. They'd be better off running their own businesses with better ROI.

Pistotita:
Bravo!!!

Nigeria is a mad area when it comes to investment. Canals everywhere. I always wonder why Nigerian Bill's are double digits. It is crazy. Cabals everywhere. Inside trading in Nigeria is mad.

All those comments up are funny. They are waiting for comments to follow up. Lol. You will see them modifying very soon.

Nairaland is really a terrible site. Lol. Instead of them to leave the spot for people who can make reasonable comments....they will be booking space. And then...they will still make useless modifications. Chai.....Seun needs to really buckle up. Many things wrong with NL. Honestly.

And what is the difference between you and those you pointed at.

What have you said so far.

Buzy body dey do you

DEBJOCH1:
I SO MUCH LOVE THAT, EVERY LAZY MEN NOW DO TREASURY BILL INSTEAD OF INVEST THE MONEY TO CREATE MORE JOB AND EMPLOYMENT. A N1M PUT IN USE INTO A RIGHT BUSINESS WILL BRING YOU MORE THAN 20% ROI AND SAME N1M WILL TAKE AT LIST 2 HOME OUT OF LABOUR MARKET, BUT WHAT PEOPLE DO IS TO GIVE THE MONEY TO FEDERAL GOVERNMENT IN THE NAME OF TREASURY BILL. KUDOS TO GOVERNMENT MONETARY REGULATORS ON THIS, THEY SHOULD FURTHER SCRATCH DOWN THE RATE TO 1% TO DISCOURAGE PEOPLE FROM DINING TB. THERE ARE THOUSAND AND ONE THINGS TO INVEST YOUR MONEY INTO, BUT SOME BLIND PEOPLE WONT SEE THE OPPORTUNITY.

/
Name one business that gives 20% ROI in Nigeria after overhead (salaries, rent, tax, diesel/fuel, extortion, etc). Nigeria (especially this Buhari's regime and dearth of infrastructures) is not business friendly--too many unstable variables.

/

SalamRushdie:


How is this good news , the govt first excludes many parties from OMO which lured people toward treasury bills and then they reduce the interest rates

Why are people lured to govt investments?
The aim of Tbills and OMO are to control inflation not to enrich individuals...

Govt intends encouraging people to invest in the real sector of the economy.
Reduction in rates will also ensure reduction in lending rates. ...
Banks will soon start lending below 20%

pickatyou:
Sounding like bad news

In Nigeria bad news comes in the morning and evening.
The afternoon is always better.

HeavenShield:
The purpose of TB is to raise funds amongst other things..for Budget expenses of govt.
If the purpose is realized, then why offer more rate of returns for investors?

But in the meantime. Why will you shift goalpost in the middle of a game?

CBN is Cheating.
Someone should stop them.
I mean, this erodes investors confidence.

How have they shifted goal post in the middle of the game?

MohAbdullah:
despite being an economist student, I still don't understand all these analysis

I think someone should explain better for me

It's unfortunate that you are an "economist student". Please which university offers economist?

dayleke:
Somebody please analyze o....

"Crash" means bad news anyway.

Yes crash means bad news for investors like me and you, good news to the government because they will be borrowing money at a very cheap rate. Imagine banks crashing there own lending rate, bank will fold up at 8%.

The fg never want citizen to benifit but rather, they want to tax us more, reduce our income to the lowest, and cement us as the capital poverty of the world.

They have reduced the interest you get after purchasing treasury bills from 2 digits(10 and above) to single digits (9 ) so as to discourage purchasers... Which school are you studying banking and finance and which level

DenreleDave:


.. Pls i am a banking and finance student, can someone explain more about this to me?

I bliv learning is unending

ntyce:


Why are people lured to govt investments?
The aim of Tbills and OMO are to control inflation not to enrich individuals...

Govt intends encouraging people to invest in the real sector of the economy.
Reduction in rates will also ensure reduction in lending rates. ...
Banks will soon start lending below 20%

Yes the main aims of T bills and OMO are to control inflation but profits are the bait used to encourage people

ntyce:


Why are people lured to govt investments?
The aim of Tbills and OMO are to control inflation not to enrich individuals...

Govt intends encouraging people to invest in the real sector of the economy.
Reduction in rates will also ensure reduction in lending rates. ...
Banks will soon start lending below 20%

You think so? Guy wake up. Bank lending rate will never fall. That crook cbn governor had so much enrich bank books and make banks more lazy.

If nigeira is following the principle of economics, all rates from cbn and commercial banks ought to have been reduced,but rather the cbn governor is enriching the banks and his foreigns friends. Why did he kick individuals out of the omo market and allow commercial banks and his crook foreign friend to control the market?

ursullalinda:
Pls someone should break down in a lay man's language

It's simple.
As Fixed Deposit is to Commercial Banks, Treasury Bill is to CBN. TBills is kind of a loan to the Government.
The summary of it is that Since a lot of people are willing to lend to government, the government have the upper hand to say they will pay less interest.
From another perspective to view the single digits rate is; CBN wants to encourage investments in the real sector by making TBills unattractive

Which business in Nigeria gives 20% roi... Omoh no Dy talk anyhow like say na abroad we Dy.. name just 1 business in Nigeria that gives 20% return on investment for someone with a startup capital of more than 500k-1mill believing dats de average amt an average Nigerian invests on treasury bills

DEBJOCH1:
I SO MUCH LOVE THAT, EVERY LAZY MEN NOW DO TREASURY BILL INSTEAD OF INVEST THE MONEY TO CREATE MORE JOB AND EMPLOYMENT. A N1M PUT IN USE INTO A RIGHT BUSINESS WILL BRING YOU MORE THAN 20% ROI AND SAME N1M WILL TAKE AT LIST 2 HOME OUT OF LABOUR MARKET, BUT WHAT PEOPLE DO IS TO GIVE THE MONEY TO FEDERAL GOVERNMENT IN THE NAME OF TREASURY BILL. KUDOS TO GOVERNMENT MONETARY REGULATORS ON THIS, THEY SHOULD FURTHER SCRATCH DOWN THE RATE TO 1% TO DISCOURAGE PEOPLE FROM DINING TB. THERE ARE THOUSAND AND ONE THINGS TO INVEST YOUR MONEY INTO, BUT SOME BLIND PEOPLE WONT SEE THE OPPORTUNITY.

pickatyou:
Sounding like bad news

In Nigeria bad news comes in the morning and evening.
The afternoon is always better.

In this country; Bad news are like opening and closing stocks, you just have to take it.

Bad news for TB investors

Lush100:
The news (being good or bad ) depends on the financial dynamics of the economy.
MPR rate( moneytary policy rate ) is usually the guide or benchmark that determines general lending rate.
If I can recall "rightly" MPR has been on 13.5% since around Sept. meaning savings account rate is 4.05%.
I see an imbalance here cos T-BILL rate has gone as low as 7-10% while MPR rate is still at 13.5% meaning that despite this reduction banks are not going to reduce lending rate to customers which hovers around 32-43%.
Direct investment will be less attractive meaning FDI will reduce . local businesses will not enjoy the rate "crash". meaning govt will eventually have less money gained from FDI and general business transaction.. A lot of financial houses including insurance, pension houses ,brokers will reduce their profit outlook as they will make less monies.
Slightly more money will be in circulation and businesses will still be hard -pressed because lending rate is still high while inflation will pick up.
however because December period is usually an all time season-high for consumer spending effect of these above will only start to manifest in mid-January and early February
things might be very tight in the business sector but equities in businesses will increases since gains from investment is low.

The govt can ease the tight business environment expected to follow by opening borders or allowing a simpler and quicker process for clearing goods at the port to allow for increased business traffic in the sea port to placate whatever negative effect land border closure might have on business and make cross-border transaction shift to import/export by sea.
Those with personal assets (non-borrowing) also called equities for businesses will be the business biggest gainers.

In all, this decision or scenario seems temporary unless CBN intends to reduce MPR rate early next year then we will get the true picture of the direction of CBN/Govt

my 2kobo lay man analysis (for those that need some explanation)

cc: chloride6

VicThory

KingAzari

izzou

Leadafrica

The MPR is an advisory rate...Doesn't determine much as it is seldom used in credit pricing in Nigeria..

ntyce:


Why are people lured to govt investments?
The aim of Tbills and OMO are to control inflation not to enrich individuals...

Govt intends encouraging people to invest in the real sector of the economy.
Reduction in rates will also ensure reduction in lending rates. ...
Banks will soon start lending below 20%

If people and banks are banned from the OMO, then who now goes ?

Just2endowed2:


Yes crash means bad news for investors like me and you, good news to the government because they will be borrowing money at a very cheap rate. Imagine banks crashing there own lending rate, bank will fold up at 8%.

The fg never want citizen to benifit but rather, they want to tax us more, reduce our income to the lowest, and cement us as the capital poverty of the world.

Thank you for tha analysis bro....