Three commercial banks generate N197.8bn from T-Bills investment

 

United Bank for Africa Plc (UBA), Zenith Bank Plc and Guaranty Trust Bank Plc (GTBank) earn a sum of N197.8 billion interest investing in Federal Government Treasury Bills (T-Bills) between January and September 2017.

The above banks invested estimated N1 trillion in Debt Securities (T-Bills and Federal Government Bond) as Central Bank of Nigeria (CBN) issues T-bills twice a month to help the Federal Government to finance 2017 budget deficit, curb money supply growth and provide an avenue for banks to manage liquidity.

The money market this year has been short of liquidity due to CBN’s mopping up of the local currency using the T-Bills and Bond auctions.

CBN had planned to borrow about N1.2 trillion in the second quarter of 2017 alone, which will could take Nigeria’s T-Bills purchases to over N4 trillion by the end of September 2017.

Interestingly in the banking industry, Zenith Bank continued to generate the highest interest income from investing in T-Bills despite low exposure to Debt Securities while GTBank investment in Debt Securities hits the rooftop between January and September this year.

The breakdown by Business247 Online News revealed that Zenith Bank earned N84 billion investing in T-Bills between January and September this year, an increase of 125 per cent over N37 billion earned from T-Bills in the same period of 2016.

The bank’s investment in bebt securities hit N227 billion in nine months of 2017 from N182.8 billion reported in 2016.

Also, GTBank earned N66 billion investing in T-Bills between January to September 2017, an increase of 141.7 per cent from N27.5 billion in the same period of 2016.

However, GTBank’s investment in debt securities moved to N484 billion as at September 30, 2017 as against N434.9 billion investment in Debt Securities in 2016.

In addition, UBA earned N47.2 billion investing in T-Bills, an increase of 132 per cent over N20.4 billion recorded between January to September of 2016.

The pan-African financial institution investment in Debt Securities rose by 58.4 per cent to N311 billion from N196 billion reported in 2016 financial year.

Finance analysts had explained that commercial banks will continue to invest in Debt Securities due to its high yield and risk free investment.

The Head, Research and Strategy at GTI Securities Limited, Mr. Chucks Anyanwu, explained to Business247 Online News that, investment in T-Bills is safe and returns are constant whether the nation’s economy goes severe.

According to him, Government has to borrow using the T-Bills and Bond following the dwindling global oil prices.

Government borrowing has sky rocketed this year as oil revenues dip and the country strives to dig out of its greatest economic crisis in over 2 decades.  To address revenue shortfalls, the government has resorted to borrowing in the domestic market often at exorbitant rates.

He said, “The effect of global oil prices has forced government to break and there was urgent need for government to grow its borrowing to be able to fund projects across the country. Out outlook as far as foreign borrowing in 2016 was dim because our reserve was down and were not attractive country to borrow funds.

“There was a lot of loan loss provisions by commercial banks attributed to contraction in Gross Domestic Products (GDP). The nation’s economy in 2016 was in shambles and banks been the critical segment of the any economy were major casualties.

“Last year, Nigeria was in a situation where Government needed funds while banks needed safety of investment – there was a collective needs that was meant.

“The reason why commercial banks were exposed to T-Bills was because they were looking for safe havens, deploy their assets where it will safe and make high yield on investment.”

He noted that banks were the only investors that fit into investment in T-Bills and Bond Market, given illiquidity in the nation’s economy.

He explained that commercial banks investment in T-Bills was a strategy to diversify their portfolio cases.

Explaining further, he said, “There is nothing bad in commercial banks investing in T-Bills provided they were not neglecting credit creation to the real sector. Banks are created to make money besides their financial intermediary. ”