The Central Bank of Nigeria is planning to borrow N129.67bn ($403.01m) in short-dated Treasury bills at an auction on Wednesday.
The CBN said it would raise N28bn in three-month paper, N33.49bn in six-month bills and N68.18bn in one-year bills.
According to a public notice by the lender, payment for the purchases will be made on Thursday.
The Federal Government issues Treasury bills to raise cash to fund the budget deficit, manage banking system liquidity and curb rising inflation.
The nation’s interbank lending rates were flat at around 15.25 per cent for overnight lending on Friday, even as market liquidity dropped significantly because of persistent Treasury bill sales by the central bank.
Traders said market liquidity should be below N100bn due to consistent cash withdrawal by the CBN via Treasury bill sales, although data on commercial lenders’ cash balance with the central bank was not available on Friday, Reuters reported.
Traders said the CBN had sold around N1.2tn ($3.73bn) in Open Market Operations Treasury bills at 14 auctions in one month in its bid to reduce liquidity in the banking system and curb pressure on the foreign exchange market.
“Market liquidity is very thin,” one dealer said.
According to the traders, banks have been resorting to the central bank’s standing lending facility to cover their positions.
The naira fell to an all-time low of 490 against the dollar at the parallel market early on Friday before recovering to 475 amid the lingering dollar shortage.
At the official market, the naira closed flat at 305.25 to the dollar, the same level it has held for the last two weeks, thanks to support from the central bank.
“We expect the interbank lending rate to remain at the present level next (this) week as the central bank is expected to continue its liquidity management strategy to curb pressure on the forex market,” one told Reuters.
The CBN had borrowed N140.88bn ($448m) via short-dated Treasury bills at an auction last Wednesday, attracting lower yields across the board, except on the three-month debt that was flat.
Traders said yields on the local debt were expected to gradually trade lower after the CBN’s Monetary Policy Committee retained its benchmark interest rate at 14 per cent.
The central bank had borrowed N183.24bn via Treasury bills at an auction two Wednesdays ago, with mixed yields on all the tenors.
The Federal Government has estimated that it will borrow around N900bn from the local debt market this year to fund a budget deficit projected at N2.2tn.
The CBN said it was planning to borrow N1.77bn via Treasury bills in the last three months of the year.
In its fourth quarter Treasury bill issue programme, the apex bank said it would raise about N815.37bn, comprising 91 days, 182 days and 364 days’ debt instruments.
In addition to the above, the central bank is also planning to raise about N952.05bn as rollover in the three categories of the instruments.
The Federal Government distributes revenues from crude exports and taxes among the three tiers of government every month.
