Nigeria Bars Some Firms From High-Yielding Bonds to Boost Growth
October 24, 2019695 views0 comments
Nigeria barred individuals and local non-financial firms from buying high-yielding central bank bonds, a move designed to stimulate bank loans for purposes other than market speculation.
The two types of investors are excluded from participating in auctions for open-market operations, which are short-term central bank securities, the Abuja-based regulator said in a letter to banks that was seen by Bloomberg.
“We don’t want to leave room for arbitrage,” central bank spokesman Isaac Okorafor said in a text message. It will discourage banks from giving loans to “speculators” who want to buy government securities instead of investing in the “real economy.”
Read Also:
- MTN exits two African countries to sharpen focus on high-growth markets
- 4G ,5G adoption push Nigeria's data usage to record-high 721,522 terabytes
- Coronation says Nigeria's infrastructure investment lags population…
- CBN jerks up benchmark interest rate to record-high 24.75% to tame inflation
- Access Holdings targets N365bn rights issue to boost capital base
The measures are in line with a wider policy to penalize banks that don’t boost lending, according to Okorafor.
Secondary Market
The ban’s impact may be limited because it does not extend to the secondary market or foreign portfolio investors.
“The central bank has been uncomfortable with the level of demand at the OMO auctions recently and clearly they’re trying to reduce it,” said Omotola Abimbola, an analyst with Lagos-based Chapel Hill Denham Securities Ltd. “But this measure won’t go that far because they still have access to the secondary market.”