NIBOR Holds Attraction over Bonds – CSL




The Nigerian Inter-bank Offer Rate (NIBOR) is said to offer investment attraction over bonds, given Nigeria’s current fiscal position. Head, Investment Strategy, CSL Stockbrokers, Guy Czartoryski, who made the disclosure in Lagos yesterday, urged banks to consider selling Nigerian bonds and investing funds in the country’s inter-bank lending market.


“Rates are set to gain in that market because of a possible decline in naira supply,”  Czartoryski said.  The investment strategist told THISDAY that the Nigerian inter-bank offered rates may “spike” as a potential drop in bank deposits by state departments causes inter-bank rates to rise as liquidity dries up, enhancing returns to investors.


According to the strategist, monthly payments to government departments may be delayed by budget debates in the Federal Account Allocation Committee (FAAC), which distributes funds to Nigeria’s three tiers of government. He said that the jumps “would provide opportunities for banks to lessen exposure to bonds and take NIBOR.” CSL expressed the view that a fall in Nigeria’s Excess Crude Account, in which the country saves money during periods of high oil prices may also cut off liquidity.


Three-month NIBOR has retreated to 10.2 per cent from 15.6 per cent in January. A decline in bond prices raised the yields on securities maturing in two, three, four, eight and 19 years to an average of 5.86 per cent at the end of June from 4.68 per cent on March 1, and yields will probably rise to 6.4 per cent by the end of the third quarter because inflation remains relatively high, CSL analyst Guy Czartoryski said.


Nigeria’s inflation rate declined to 11 per cent last May, the lowest since September. Inflation is expected to accelerate in the second half of this year owing to monetary and fiscal expansion. CSL reported that Yields on Nigerian bonds compare with 7.4 per cent for five- year bonds in India and 14.6 per cent on 10-year Venezuelan bonds.





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