Yields on Nigerian T-Bills fall at auction

Yields on Nigerian T-Bills have taken a downward turn at the recent auction, indicating potential shifts in the fixed income and forex market. The central bank report suggests that liquidity challenges in the foreign exchange space are likely to persist in the second half of 2016 due to the impact of low oil prices. This development comes amidst ongoing discussions about the potential sale of assets to bolster reserves and attract foreign investments. Chioma Udu, a Forex Dealer at GT Bank, shared insights on the market dynamics and the outlook for the Naira during an interview with CNBC Africa. The recent T-Bills auction saw yields dropping across the board, with the market closing at an 18.25% discount. Choma pointed out that the current system has ample liquidity, influenced by a maturing OMO bill injecting about 200 billion into the market. Anticipating actions from the Central Bank of Nigeria (CBN), she suggested the possibility of future OMO interventions to maintain yield levels. She highlighted the significance of OMO auctions in providing clues about expected yield levels in the secondary markets. The auction rates serve as pointers for market participants, guiding their decisions on appropriate yield levels. Moving on to the forex market, Choma acknowledged the persistent challenge of low liquidity, affecting foreign investor interest. While Nigeria remains an attractive frontier market, the lack of liquidity hinders investment inflows. She stressed the importance of confidence and liquidity in attracting foreign investors, whose participation could drive the Naira's appreciation. The discussion then shifted to the Naira's outlook and potential strategies to enhance liquidity. Addressing concerns about asset sales, Choma suggested considering asset concessioning as an alternative to outright sales. She emphasized that asset concessioning could bring in foreign exchange, stimulate economic efficiency, and create new job opportunities. Choma discouraged the notion of selling critical assets that generate profits, advocating for strategic asset management to foster economic growth. The interview also touched on the skepticism surrounding asset sales, with considerations for transparency and past accountability. Choma's perspective echoed a cautious approach towards asset dispositions, stressing the need for clear utilization plans to build public trust. Amidst speculations and debates on asset sales, the focus remains on fortifying reserves and instilling investor confidence through prudent economic management. The conversation highlighted the complexities of balancing short-term liquidity needs with long-term economic sustainability in Nigeria's evolving financial landscape.