No less than four commercial banks operating in the country, have invested a whopping N1.9 trillion in bonds and Treasury bills during the financial year ended, 2016.
The Deposit Money Banks (DMBs) including Zenith Bank, Access Bank, United Bank for Africa Plc (UBA) and Guaranty Trust Bank.
It is worthy of note that in the financial year under review, the federal government through the Central Bank of Nigeria (CBN) and Debt Management Office (DMO) continued to mop up liquidity in a move to support the nation’s budget and curb inflation rate.
But we note in our checks that commercial banks investment in the two major securities that include Treasury Bills (T-Bills) and bonds jerked up significantly in 2016.
For instance, GTBank investment in securities gained 34 per cent to N528 billion from N393.6 billion in 2016 while Zenith Bank investment in securities dropped by 6.4 per cent to N199 billion from N213 billion in 2015.
With strong, liquid balance sheet with continued growth led by loans and securities portfolio, Zenith Bank investment in T-Bills rose by 47.48 per cent to N557.4 billion from N377.9 billion recorded in 2015.
Access Bank investment in Securities gained 23 per cent to N229 in year under review as against N186 billion in prior year.
Access bank last year had strong market position in foreign exchange and government securities trade, with the lead market share in the foreign interbank and fixed income market.
In addition, United Bank for Africa investment in securities closed 2016 at N970 billion, an increase of about 13 per cent from N856.87 billion in 2015.
In the review period, Federal Government Bonds offered for sale (new issues and re-openings) was N645 billion, representing an increase of 9.32 per cent above the N590billion offered in the first half of 2016. The CBN said public subscription and sales decreased to N941.90 billion and N499.20 billion, at end-December 2016, from N1.18 trillion and N529.50 billion, at end-June 2016, respectively.
According to the CBN, “The decrease in subscription and sales were attributed to the liquidity constraints in the banking system which led to reduced patronage of Federal government bonds by banks despite the strong appeal of fixed income assets and the impressive yield on Federal government bonds.
“The price of in the banking system which led to reduced patronage of Federal Bonds at the secondary market declined as a result of reduced transactions and demand, as well as increased banking system liquidity constraints and other macroeconomic uncertainties.”
The CBN in its Financial Stability Report explained further that the upward review of the interest rate to 14 per cent in the second half of 2016, and the sustained open market operations activities by the Bank which further reduced market liquidity, contributed to increased yield on federal government bonds in the secondary market.
On Treasury Bills, the report by CBN said the T-Bills of 91-, 182- and 364-day tenors totaling N2.1 trillion were issued and allotted during the second half of 2016. This represented a decrease of 14.61 per cent, when compared with N2.5 trillion recorded as at June 2016.
The Financial Stability Report by CBN explained that total subscription was lower at N3.62 trillion, depicting a decrease of 28.41 per cent, when compared with N5.1 trillion recorded in the first half of 2016.
CBN noted that the decrease in T-Bills issued, allotted and subscribed was attributed to the tight liquidity in the banking system precipitated by the sustained mop-up by the CBN, provisioning of funds by banks for the special foreign exchange interventions for Forwards transactions at the foreign exchange market.
“The holding structure of investments in T-Bills in the review period indicated that banks took up N887.14 billion, representing 42.28 per cent of the total T-Bills issued, as against N1.7 trillion, representing 71.05 per cent of T-Bills issued in the preceding period. Mandate and internal customers, and CBN take-up accounted for N1.07 trillion and N135.59 billion, respectively compared with N683.38 billion, and N28.00 billion in the first half of 2016.
“The reduced up-take by banks was attributed to tight liquidity in the banking system and higher yield in CBN bills, leading to the significant increase in mandate and internal customers’ participation as well as increase in CBN take-up,” the report added.