The Central Bank of Nigeria (CBN) has ordered banks to ensure they have secured funding before bidding for short-term government securities.
The directive, which took effect Monday, requires that all demand at auctions be “fully backed by appropriate funding,” the Abuja-based Central Bank of Nigeria said in circular to banks dated October 18. Sanctions could include canceling bids, it said, adding that it “has observed a high level of unfunded demand.”
“Insisting on funding will help the central bank assess effective demand for its securities, rather than work on speculation,” Kunle Ezun, a currency and fixed-income analyst at Ecobank Transnational Inc. in Lagos, said by phone.
Demand for Nigerian bonds may be dropping because of a slowdown in the global economy as well as weak sentiment toward emerging-market assets, according to Bank of America Corp. The West African nation depends on inflows into debt securities that yield more than 14 per cent to help support the naira.
