T-bills: Investors storm equities market after CBN ban

Following the ban of individuals and small firms from investing in treasury bills by the Central Bank of Nigeria, investors poured money into shares instead, which boosted the market capitalisation of equities by N245bn.

The CBN had barred local investors from participating in its treasury bill auctions in a bid to draw more foreign interest to boost dollar liquidity and prop up the naira.

The Chief Executive Officer, EFG Hermes Nigeria Limited, Lillian Olubi, had predicted that the equities market would see an increased investment and appetite from investors, following the CBN’s directive barring individuals and local corporates from investing in Open Market Operations auctions.

Olubi said the CBN directive would have a positive impact on the equities market, in which case such corporate organisations like pension managers would need to divert more funds into equities market investments.

In addition, the interest rates in the treasury bills market had crashed into the single digit region at the end of the Primary Market Auction on Wednesday.

The Managing Director, Afrinvest Securities Limited, Mr Ayodeji Ebo, had said following the crash of interest rates of treasury bills, investors’ search for alternative investments would intensify.

Reuters reported that the CBN, on Thursday, auctioned N300bn naira worth of open market securities, but shut out local investors out of the sale – the second since the ban was introduced, which left investors seeking alternative places to park their money.

One fund manager, who told Reuters that he had been investing in cash and bank deposits since the CBN announcement, said he thought the treasury auction ban would be relaxed soon as excess liquidity affected the markets.

The aggregation of these factors pushed investors to stocks, which recorded highest gain in five weeks, rising by 1.84 per cent on Thursday.

The All Share Index, which had recorded a year-to-date loss of -16.1 per cent, rose to 26.843.11 basis points on the back of major gains, which were recorded in banking stocks.

Activity level on Thursday was mixed as volume traded rose by 2.3 per cent to 624.8 million units while value traded declined by 9.8 per cent to N10bn.

The most active stocks by volume were Zenith Bank Plc (167.9 million units), Access Bank Plc (99.3 million units) and UBA Group Plc (67.8 million units) while Zenith Bank (N3.2bn), Nigerian Breweries Plc (N1.7bn) and MTN Nigeria Communications Plc (N1.6bn) led the top traded stocks by value.

Performance across sectors was impressive as four sectors recorded tangible gains.

Investor sentiment strengthened as market breadth (advance/decline ratio) surged to 11.3x from the 0.8x recorded on Wednesday as 34 stocks gained against three decliners.

The top five gainers were Ekocorp Plc, Caverton Offshore Support Group Plc, Guinness Nigeria Plc, United Capital Plc and FBN Holdings Plc, whose respective share prices gained 9.79 per cent, 9.76 per cent, 9.70 per cent, 9.66 per cent and 9.65 per cent.

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