Nigerian banks invest an additional 1.55 trillion naira in Treasury bills in a year

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Depository Banks increased their holdings in Nigerian Treasury Bills at N1.55 trillion between July 2021 and June 2022 to stand at N2.28 trillion.

This is contained in the financial market activity report for the mid-year 2022, published by the Central Bank of Nigeria (CBN).

Commercial banks accounted for 50.5% of the total N4.5 trillion Nigerian Treasury bills held as of June 2022, compared to 24.4% in the corresponding period of 2021.

  • Last year, parastatals accounted for more than half of the total.
  • Banks’ increased exposure to fixed securities is due to the increasing volatility of other variable assets and incentives to venture into risk-free government securities rather than corporate or variable debt securities.

Breakdown of the NTB structure: Deposit money banks (DMBs) accounted for 50.5% of the total after increasing their holdings from N728.9 billion registered as of June 2021 to N2.28 trillion by the end of June 2022.

  • Commercial bank holdings of Nigerian Treasury Bills in the review period stood at N29.38 billion, representing 0.7% of the total. However, it increased by 109.4% compared to 14.03 billion naira recorded in the corresponding period of 2021.
  • Parastatals accounted for 26.9% with N1.21 trillion, representing a decrease of N354.28 billion from N1.57 trillion recorded as of June 2021, while mandate and internal funds with N988.26 thousand million at the end of the first half of 2022 represented 21.9% of the total holding of Treasury bills.

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Specific bank statements: A look at the financial statements of NGX-listed commercial banks showed that Access Bank had around N203.35 billion in treasury bills as of June 2022, while First Bank had around N425.75 billion in treasury bills. Treasury and eligible bills, excluding T-bills.

  • GT Bank held about N568.3 billion in Treasury bills, N279.49 billion in FG bonds, N3.3 billion and N24.2 billion in corporate bonds and Eurobonds respectively.
  • According to the bank, the Group’s investment in risk-free government securities constitutes 98.1% of the debt instrument portfolio (December 2021: 99.9%). Investment in corporate and state government bonds represents 1.9% outstanding.
  • Stanbic IBTC said its trading assets classified as treasury bonds stood at N149.5 billion as of June 2022.
  • Meanwhile, Zenith Bank declared N926.8 billion as of the same period for Treasury Bills (FVTPL), while N1.16 billion was declared at amortized cost.

More details to keep in mind: No new Federal Republic of Nigeria Treasury Bond (FRNTB) issuance was recorded in the first half of 2022. Consequently, the outstanding stock was unchanged at N75.99 billion at the end of June 2022.

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  • A breakdown of the balances showed that the CBN had N14.290 million, while N61.700 million was in the Sinking Fund. In the corresponding period of 2021, the CBN accounted for N18,010 million, while N82,980 million was held in the Sinking Fund.
  • In the review period, N1.13 trillion worth of FGN bonds were offered, while public subscription and sale amounted to N2.85 trillion and N1.810 million, respectively.
  • The amount offered included new issues and reopenings. In the corresponding period of 2021, the issuance, subscription and allocation of FGN Bonds was N900 billion, N1.72 billion and N1.42 billion, respectively.
  • The increase in the amounts offered, subscribed and sold in the first half of 2022 was due to the government’s drive to finance the budget deficit from the domestic market.
  • Consequently, the total value of FGN Bonds outstanding at the end of June 2022 stood at Naira 15.63 trillion, compared to Naira 15.19 trillion at the end of June 2021, indicating an increase of 426.95 billion naira or 0.28%.
  • A breakdown of the holding structure of the outstanding FGN Bonds showed that commercial banks held N9.53 trillion or 60.99%, the non-bank public held N5.96 trillion or 38.16% and commercial banks held the balance of N132,630 million or 0.85%

Meanwhile, the Treasury bill rate has experienced a significant increase of late due to multiple upward adjustments to the MPR by the CBN. Recall that the Central Bank increased the monetary policy rate to 16.5% in its last policy meeting in an attempt to control the rising inflation rate in the country.

Specifically, the CBN one year The Treasury bill rate for November jumped to 14.84% from 12% in September 2022.

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