No restrictions on banks from investing in treasury bills, says CBN

The Central Bank of Nigeria (CBN) yesterday dismissed reports that it had barred commercial banks from investing in treasury bills.

It dismissed a report in the media that it had stopped commercial banks from buying treasury bills so they could be more liquid to give out loans.

A top official of the CBN said that while the central bank would be glad to see less participation by commercial banks in the primary market treasury bills auction, it makes a policy pronouncement to that effect, banks are still free to buy treasury bills.

The central bank had in the past few days taken measures to encourage commercial banks to lend more to operators of micro, small and medium scale enterprises (MSMEs), as it seeks to support the federal government’s economic diversification agenda.

Owing to this, the source,said it was the desire of the central bank to see banks channel more of their funds towards MSMEs.

He said: “We have not barred the banks from investing in treasury bills, otherwise we would have released a circular to that effect. But, we did what we did, first of all to let the market know that our interest would be for non-proprietary transactions.

“That is, investors, both local and foreign, can buy our instruments. But, we would like to see less of the banks coming to use their instruments to come to the primary market to buy treasury bills.

“However, banks and any other person can do secondary market transactions. That does not mean that banks have been barred from the treasury bills market. The CBN will use its discretion to see whether it is a general auction or a special auction that the banks can participate in.”

He added that what the central bank was trying to achieve with the initiative was that “we want the banks to focus more on lending and not buying government securities. But we are not trying to force them to do so, because we have our Prudential Guidelines that they must comply with.”

“What we are doing is like a signal, we are showing them the direction we want them to go,” he added.

He also said the central bank was not in a hurry to reduce interest rate on its open market operations (OMO) bills.

“As you can see, our OMO rates are higher than treasury bills rates. It is to show that we are not in a hurry to trend downward, because we are still in tightening mood,” he added.