In the battle of short-term money market instruments, government-backed securities are currently trouncing commercial papers.
Nairametrics’ data tracking reveals a significant 75% year-on-year decline as per value in the issuance of commercial papers in Nigeria.
In terms of volume, there was a 66% decline, as only 32 CPs were issued in Q1 2024, in contrast with the 95 issued in Q1 2023.
In Q1 2024, CPs totalling N165.36 billion were issued, a significant decline from the N664.14 billion worth of CPs issued during the same period in 2023.
Comparatively, N5.64 trillion worth of treasury bills and N1.01 trillion of OMO-bills were sold during the same period, effectively signalling a huge shift in investors’ sentiment away from commercial papers towards government-backed short-term securities.
In Q1 2023, yield rates for NT-bills ranged between 1.8% and 14.74%, however, in Q1 2024, yield rates for NT-bills have varied between 4.22% and 21.5%.
The CBN’s decision to issue short-term securities at these rates is tied to its target of reducing inflation as well as driving foreign portfolio investors back to Nigeria.
“Restricted credit availability: With the increase in the CRR, banks’ ability to lend is further curtailed. This exacerbates the challenges faced by the private sector, which is already grappling with limited access to finance.”