364 days T-bill yield rises as foreign investors sell off holdings

Nigeria’s one-year treasury bill yield rose to 10 per cent on Wednesday, having dropped to 7 percent in the previous session after the government said it would repay some outstanding maturities this month.

The government plans to resume auctions in January after paying some 198 billion Naira worth of maturities in December, which helped bills recover some ground. Traders said some foreign investors were booking profits and bidding to repatriate their funds, creating a liquidity squeeze on the currency market.

Treasury bills traded as high as 18 per cent this year. The sell-off in bills has caused low activity on the investor forex market as foreign players are not bringing in new funds but bidding to buy dollars, while banks are not willing to sell at lower than N360 per dollar, traders said.

On Wednesday, the currency market saw two transactions at N314.50 per dollar on the interbank window with commercial banks trading the Naira weaker than the central bank rate of N306.
Traders said the drop in treasury bill yields from a high of 18 percent this year has triggered a switch by local funds to bonds, currently yielding about 13.5 percent on average, on expectations that interest rates might start to fall next year. The one-year paper closed at about 9.5 percent on Tuesday.