Nigeria’s central bank sold about 400 billion naira ($1.27 billion) of Treasury bills on Friday, at between 10 percent and 12 percent well below the central bank’s benchmark interest rate of 14 percent.
“We have some major placers quoting about 20 percent for overnight placement, but most takers are not willing to borrow at that rate,” one dealer said, adding that the rate eventually settled around between 10 percent and 12 percent at 1328 GMT.
As the government increases borrowing to try to spend its way out of the first recession for 25 years in Africa’s biggest economy, Nigeria has been issuing bonds at yields below inflation to try to keep a lid on debt costs.
It has been helped by local pension funds that are awash with cash but risk-averse and which can invest more than 80 percent of pension assets in government bonds.
But the lack of a government benchmark that reflects inflation has made it difficult for corporate borrowers to issue debt.
Local currency traded flat at both official interbank window , at 315 to a dollar, with parallel market traders quoting the naira flat at 498 to the dollar. Commercial lenders quoted the currency at 305.25 a dollar, about the level it has traded since August.
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