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Nigeria Spends N1.79trn On Domestic Debt Servicing

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The cost of domestic debt instruments issued by the federal government amounted to N1,799.74 trillion between January and December 2018.

According to the annual activity report of the Central Bank of Nigeria for 2018, the figure represents an increase of N344.21 billion, or 23.65 per cent, over the N1,455.53 billion recorded at the end of December 2017.

The increase in the cost of debt servicing in 2018 was attributable to the coupon payments of new instruments (such as FGN Sukuk, Green bonds and FGN Savings bonds) that formed part of the debt stock.

A breakdown of the cost in 2018 showed  that federal government bonds coupon payments (including special Bonds) accounted for N1,118.75 billion or 62.16 per cent, while interest on NTBs stood at N640.68 billion or 35.60 per cent, FRN Treasury Bonds was N23.84 billion or 1.32 per cent, while Federal Government Sukuk constituted the balance of N16.47 billion or 0.92 per cent.

The report released by the Financial Markets Department of the CBN also revealed that, in 2018, the CBN maintained its direct intervention in the inter-bank foreign exchange market to cushion demand pressure and ensure exchange rate stability to the tune of $17,874.00 million.

Consequently, total spot sale was $25,676.77 million, while forwards sales amounted to $11,054.52 million. These spot sales comprised $3,453.09 million at the inter-bank, $1,581.40 million for invisibles, $1,315.50 million for SMEs and $8,272.26 million for the Investors and Exporters (I & E).

On the other hand, the Bank purchased $7,802.77 million at the inter-bank market. Thus, net sales by the Bank amounted to $17,874.00 million. The sum of $10,400.43 million matured at the forwards segment, while $2,760.51 million remained outstanding at the end of December 2018.

In the preceding year, total sales were $15,816.06 million, comprising $4,617.12 million as spot and $11,198.94 million as forward transactions. In the same vein, the Bank purchased $6,090.30 million, resulting in a net sale of $9,725.76 million. The sum of $10,731.27 million matured at the forwards, while $1,921.00 million remained outstanding at end of December 2017.

The increased volume of transactions in 2018 was attributable largely to the Bank’s foreign exchange policy and its management, coupled with the improvement in the levels of foreign reserves during the year.

According to the report that was released on the website of the apex bank yesterday, market sentiments remained uncertain as a result of declining inflow of portfolio investments, and uncertainties surrounding the potential outcome of the 2019 general elections and investors’ strong profit-taking led to heightened volatility.

Consequently, developments on the Nigerian Stock Exchange (NSE) were bearish during the second half of 2018. The NSE All Share Index (ASI) and Market Capitalisation (MC) decreased by 17.81 per cent and 13.87 per cent to N31,430.50 and N11.72 trillion at end of December 2018, from N38,243.19 and N13.61 trillion at the same time in 2017.

Similarly, total CBN Bills offered, subscribed and sold at the OMO auctions increased to N34,610.06 billion, N24,916.29 billion and N22,350.16 billion, compared with N13,762.94 billion, N12,344.90 billion and N11,346.48 billion respectively in 2017.

The high level of activity during the review period was attributable to the increased number of auctions to moderate the excess banking system liquidity, occasioned by the payments of statutory revenue to the three tiers of government, other fiscal disbursements and maturing CBN Bills, amongst others.

As a result of that, the cost of liquidity management in 2018 increased by 42.01 per cent to N2,114.04 billion, from N1,488.68 billion in 2017.


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