The Central Bank of Nigeria sold N157.05bn ($994.62m) worth of treasury bills on Wednesday at yields lower than its previous auction on the back of strong demand from offshore investors and local fund managers.

The CBN sold N22.05bn in 91-day notes at a return of 10.30 per cent, marginally lower than the 10.35 per cent 91-day bills sold at the last auction on April 25.

The bank sold N30bn worth of 182-day paper at 11.59 per cent, 50 basis points lower than at the previous auction, while N105bn of 364-day bills was sold at 11.68 per cent compared with a yield of 12.25 per cent, also on April 25.

Total subscription stood at N400.75bn, compared with N186.37bn at the previous auction, indicating the renewed appetite.

Meanwhile, the naira firmed to a one-month high against the United States dollar on the inter-bank market last week, supported by dollar flows from offshore investors buying local treasury bills.

The local unit was trading at N157.55 to the greenback at mid-day, a level it last touched on April 10, and firmer than Wednesday’s close of N157.80.

Reuters quoted a dealer as saying, “Dollar flow from offshore investors buying local debt at an auction on Wednesday boosted supply in the market.”

Dealers said the flows from offshore investors buying bonds complemented dollar supply from two oil companies on Wednesday to support the local unit, but fear of surging demand for the greenback, may cut short the naira rally.

“We may not be able to sustain the rally due to the strength of dollar demand in the market,” another dealer said.

Bloomberg quoted London-based emerging-markets strategist at Standard Bank Group, Mr. Samir Gadio, as saying, “The naira gained ground on the back of capital inflows associated with Wednesday’s T-bill auction which generated decent offshore appetite.

“This also follows Nigerian National Petroleum Corporation dollar sales and other foreign-exchange oil flows earlier this week.”

Oil companies are the second-biggest source of dollars after the CBN, which offers foreign currency at auctions on Mondays and Wednesdays to maintain exchange-rate stability.

Nigeria depends on oil shipments for 80 per cent of government revenue and 95 per cent of its export income.

Source: Punch