The Debt Management Office (DMO) has dismissed claims that the Central Bank of Nigeria (CBN) ‘increased’ rates to ‘attract’ investors at the Nigeria Treasury Bill (NTB) auction.
The debt office also denied insinuations that the higher interest rates on NTB are due to fears of capital flight ahead of the 2019 general election.
It said sinceforeign investors still participate in the domestic fixed income securities markets, it is wrong to attribute the Auction Rate to fears about capital flight. To buttress this point, Interest Rates on NTBs in the first half of 2017 were much higher than the present rates, at a time when there was no election approaching”.
Shedding more light on how NTB interest rates are derived, the statement said “investors bid at the NTBs Auction at their own Interest Rates, thus the Rates on NTBs are not predetermined or determined by the CBN or the DMO. The Rates at which the investors bid is entirely at their discretion, but will typically depend on prevailing secondary market rates, their portfolio needs and investment preferences.”
It added that “in allotting to bidders oftentimes, the DMO and CBN will also be guided by similar factors and the implications for markets and macroeconomic stability. Taking into account all these factors, the Interest Rates at the Auctions will ultimately be determined by demand and supply.”
NTBs are the Federal Government of Nigeria’s short-term debt instruments issued regularly by the DMO through the Central Bank of Nigeria (CBN), which in this instance, is the DMO’s agent.