Following a steady rise in banks' loan books, Nigerian banks are expected to drastically reduce their exposure to the FGN bond market in the new- year, a report by
Nigerian banks were over the years the dominant players in the FGN bond market when the Central Bank of
The report however predicted that the pension funds, who are also important players in the market, will now remain the dominant player given that they were badly burnt by the equity market shake-out in 2008 and 2009.
"The evidence is in the spike in rates for 90-day interbank money in the immediate aftermath of the hike in the Cash Reserve Ratio (CRR) for banks' public sector deposits. Liquidity can be tighter for other reasons such as fx demand and changing Federation Accounts Allocation Committee (FAAC) payouts."
They added, "FGN bond yields narrowed by more than 400bps between the announcement in
"The achievement of single-digit inflation on the bond market will be negligible. The FGN bond market is also underpinned by strong domestic institutional demand at auction. In 2013 the Debt Management Office (DMO) raised an average of N75 billion (
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