Federal Government Domestic Debt decreased by 1.16 per cent in 2018. CBN

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The Central Bank of Nigeria released it annual activity report for 2018 recently. The report revealed that the Federal Government Domestic Debt decreased from N12.59 trillion in 2017 to N12.44 trillion in 2018 representing a 1.16 per cent drop. According to the Apex bank, the decline was due to the Government’s preference for foreign borrowings to finance its fiscal deficits because of lower interest rates.

The domestic debt stock comprises of:

  • FGN Bond of N9.13 trillion representing 73.41 per cent of the total local debt stock
  • NTBs of ₦2,735.97 billion representing 21.99 per cent.
  • FGN Special Bonds of ₦200.54 billion or 1.61 per cent
  • FGN Sukuk of N200 billion representing 1.16 per cent
  • Federal Republic of Nigeria (FRN) Treasury Bonds of ₦150.99 billion or 1.21 per cent.
  • FGN Savings Bonds of N10.75 billion representing 0.09 per cent
  • FGN Green Bonds of N10.69 billion representing 0.09 per cent

The cost of debt servicing however increased by N344.21 billion in 2018 from N1,46 trillion in 2017 to N1.80 trillion at end December 2018 representing 23.65 per cent despite the decrease in the domestic debt profile and this can be attributed to the coupon payments of new debt instruments (FGN Sukuk, Green bonds and FGN Savings bonds) that were issued late in 2017.

Other highlight of the report

Developments in the Foreign Exchange Market

  • CBN sustained its interventions in critical sectors, such as agriculture, airlines, petroleum, raw materials and machinery.
  • The Apex Bank continued its sale of foreign exchange for invisible transactions, such as the personal and business travel, payment of medical bills and school fees.
  • The SMEs, Oil companies and the I & E windows provided easy access to foreign exchange.
  • The CBN increased the volume and frequency of sales of foreign exchange to BDCs
  • The Bank sustained its active participation in the Naira-Settled OTC Futures Market established in 2016.
  • In April 2018, the CBN signed a Bilateral Currency Swap Agreement (BCSA) with the People’s Bank of China (PBoC-CBN), and commenced full implementation of the agreement with the CBN-Renminbi Retail Secondary Market Intervention

Activities in Inter-bank Foreign Exchange Market in 2018

  • Total spot sale was US$25,676.77 million in 2018 compared to US$4,617.12 million spot sales in 2017. The 2018 spot sales comprised of: US$3,453.09 million at the inter-bank, US$1,581.40 million for invisibles, US$1,315.50 million for SMEs and US$8,272.26 million at the Investors’ and Exporters’ (I & E).
  • Forwards sales amounted to $11,054.52 million in 2018 compared to US$11,198.94 million as forward transactions in 2017. The sum of US$10,400.43 million matured at the forwards segment in 2018, while US$2,760.51 million remained outstanding at end-December 2018
  • On the other hand, the Bank purchased US$7,802.77 million at the inter-bank market. Thus, net sales by the Bank amounted to US$17,874.00 million in 2018. While, the Bank purchased US$6,090.30 million, resulting in a net sale of US$9,725.76 million in 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.

Activities at the Sock Exchange in 2018

  • The All Share Index (ASI) opened at 38,264.79, peaked at 44,460.18 in February and then closed at 31,430.50 at end-December 2018.
  • The level at end-year represented a decrease of 6,834.29 points or 17.86 per cent, when compared with the figures at the beginning of 2018.
  • Similarly, the equity market capitalization declined by ₦1.90 trillion or 13.93 per cent, to ₦11.72 trillion at end-December 2018, from ₦13.62 trillion at the beginning of January 2018.
  • In 2017, the ASI and MC increased to 38,243.19 and ₦13.61 trillion at end December, from 26,616.89 and ₦9.16 trillion at the commencement of trading in January 2017.
  • The volume and value of shares traded was 104.74 billion and ₦1.17 trillion in 2018, compared with 93.23 billion and ₦1.08 trillion in 2017. In addition, the number of deals increased to 1,063,650in 2018, from 878,223 in 2017. The increase in the volume and value of transactions was due largely to the bullish activities in the early part of the review period. However, due to the capital reversals in the latter part of 2018, there was a decline in volume, value and number of deals

Nigerian Treasury Bills

  • The total value of NTBs issued and allotted was ₦3,342.39 billion apiece, indicating a decline of ₦1,153.08 billion or 25.65 per cent below the level in 2017.
  • The decrease was attributable largely to lower NTBs issued coupled with the redemption of treasury bills worth ₦78.05 billion in December 2018 as the Government indicated its preference for cheaper and longer tenured foreign debt.
  • Total public subscription stood at ₦6,713.78 billion, compared to ₦7,178.38 billion in 2017. The lower level of public subscription was traceable to the high patronage at OMO auctions.
  • The structure of allotment of the instrument indicated that banks (including foreign investors) took up ₦1,763.47 billion or 52.76 per cent, mandate and internal funds ₦1,508.18 billion or 45.12 per cent and merchant banks ₦70.73 billion or 2.12 per cent.
  • There was no CBN take-up in the period under review.
  • The stop rates, in 2018, ranged from 10.00 to 12.55 per cent for the 91-day, 10.30 to 13.93 per cent for the 182-day and 10.70 to 14.45 per cent for the 364-day tenors.
  • The range of stop rates in 2017 were between 12.95 and 14.00 per cent for the 91-day, 15.00 and 17.50 per cent for the 182-day and 15.57 and 18.98 per cent for the 364-day tenors.

See full Annual Activity Report released by the Financial Market Department of CBN

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