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Bids for Treasury Bills, OMO Dominated by Foreign Investors – CBN

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The Central Bank of Nigeria (CBN) has revealed that over 75% of bids received during the auctions of government securities held on March 1 and 6, 2024, came from foreign investors, underscoring their growing interest in Nigeria’s financial instruments.

The CBN conducted Open Market Operations (OMO) auctions on March 1, 2024, and successfully sold N1.06 trillion in bills. Subsequently, the apex bank carried out another round of Treasury Bills (T-Bills) auction on March 6, 2024, offloading about N1.32 trillion.

These auctions not only demonstrate robust demand for Nigerian debt but also reflect increasing confidence among foreign investors in the Nigerian economy. According to a statement from the apex bank on Thursday, there is a heightened investor interest in short-term sovereign debt.

The statement explained that, “Higher FX inflows continued in March 2024, driven by increased investor interest in short-term sovereign debt following the recent adjustment to benchmark interest rates. Government securities issuances have been significantly oversubscribed, with foreign investors accounting for over 75% of bids received at the auctions conducted on March 1 and 6, 2024.”

The CBN reported a significant rise in foreign inflows in February 2024, attributed to higher remittance payments from Nigerians living abroad and an increase in the purchase of naira assets by foreign portfolio investors.

The Bank’s Acting Director of Corporate Communications, Mrs. Hakama Sidi Ali  disclosed in a press briefing in Abuja that overseas remittances reached $1.3 billion in February, a substantial increase from $300 million in January. 

Foreign investors purchased over $1 billion of Nigerian assets last month, with total portfolio flows for the early part of 2024 reaching at least $2.3 billion, compared to the $3.9 billion recorded for the entirety of last year.

The surge in foreign exchange inflows has continued into March 2024, attributed to the recent adjustments in benchmark interest rates which have heightened investor interest in short-term sovereign debt.

According to the statement, Sidi Ali noted that, “The Bank’s data indicates that overseas remittances rose to US$1.3 billion in February 2024, more than four times the US$300 million received in January. Foreign investors purchased more than US$1 billion of Nigerian assets last month, with total portfolio flows of at least US$2.3 billion recorded thus far in 2024 compared to US$ 3.9 billion seen in total for last year.”

This increase in foreign participation in Nigeria’s debt market aligns with the strategic objectives of CBN Governor, Mr. Olayemi Cardoso, aiming to curb inflation, stabilize the exchange rate, and boost confidence in the banking system and overall economy.

Utilizing a detailed plan outlined during last month’s Monetary Policy Committee (MPC) meeting and a conference call with foreign portfolio investors, Governor Cardoso aims to sustain increases in Nigeria’s foreign currency reserves and enhance liquidity in the foreign exchange market.

The CBN plans to sell N1.64 trillion in Nigeria Treasury Bills in the second quarter of 2024 between March and May. This new offer is a refinancing of existing maturing treasury bills of different tenures. According to the bill issue program, the apex bank will be refinancing its 91-day, 182-day, and 364-day treasury bills that mature during the period.