Nigeria’s Central Bank Auction Yields Surge, Signals Shift in Rate Policy

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In recent auctions, the central bank has offered short-term paper, known as OMOs (open market operations), at significantly higher yields compared to government debt of similar tenor. The 365-day OMOs, sold to banks and offshore investors, fetched 17.5%, surpassing the 8.39% yield on government Treasury bills with the same maturity.

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Despite the lower yield, domestic pension funds, constrained in their investment choices, heavily invest in government bills.

Sunmbo Olatunji, Group Head of Treasury at Access Bank Plc, noted that the central bank is pushing for higher rates. Speaking at an investor conference in Lagos, she mentioned the removal of the cap on interbank borrowing rates, allowing the interbank rate to reach 22-23%. This move signifies the central bank’s reliance on market forces to determine rates.

Following the monetary policy committee meeting in July, where the benchmark rate was raised to 18.75%, inflation surged to a 27-year high of 28.9%.

President Bola Tinubu’s reforms, including abolishing fuel subsidies and easing the exchange-rate regime, contributed to the inflationary pressures. The rising inflation has fueled expectations of aggressive rate hikes.

While the schedule for the next MPC meeting is pending, the central bank has hinted at an inevitable upward adjustment in rates, emphasizing the evolving monetary policy stance.

Godwin Okafor
Godwin Okaforhttps://naija247news.com
Godwin Okafor is a veteran Financial Journalist, Internet Social Entrepreneur, and the visionary Founder of Naija247news Media Limited. With an extensive career spanning over 16 years in financial journalism, Godwin possesses a wealth of experience that seamlessly bridges both traditional and digital media landscapes. His journey in journalism commenced at Business Day, Nigeria, where he laid the foundation for his prolific career. In 2010, Godwin took a bold step by founding Naija247news Media, a platform that has since become a prominent player in delivering timely and accurate news. Educationally, Godwin Okafor holds a Bachelor's degree in Industrial Relations and Personnel Management from the prestigious Lagos State University, Ojo, Lagos. His commitment to continuous learning led him to the Lagos Business School, where he further honed his skills. Additionally, he is recognized as a Fellow of the University of Pennsylvania, having successfully completed the Wharton Seminar for Business Journalists. Throughout his illustrious career, Godwin has earned acclaim by winning numerous journalism awards, a testament to his dedication to excellence in reporting. Beyond his role as a Financial Journalist, Godwin Okafor wears the hat of the Chairman at Emmerich Resources Limited, the publishing entity behind Naija247news. His visionary leadership has played a pivotal role in shaping the media landscape and establishing Naija247news as a trusted source of information. Godwin Okafor's multifaceted expertise, commitment to journalistic integrity, and leadership in the realm of business journalism underscore his influential presence in both the media and entrepreneurial spheres.

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