Nigerian govt borrowed N3.2 trillion through treasury bills in 2020

The Federal Government borrowed N3.2 trillion from the investing public through treasury bills, TBs, in 2020, while it paid N253 billion as interest on TB borrowings from January to September 2020.

This represents a marginal increase of 1.9 per cent, year-on-year, y/y when compared with the N3.13 trillion borrowed through the instrument in 2019.

Furthermore, the amount borrowed in 2020 represents 84 per cent of the N3.71 trillion treasury bills borrowing that matured and were repaid in 2020.

Analysis of TBs issued by the Central Bank of Nigeria (CBN) on behalf of the federal government (FG) showed that the amount of matured TBs repaid rose by 19 per cent, y/y, to N3.71 trillion in 2020 from N3.12 trillion in 2019.

Further analysis showed that the FG borrowed N922.3 billion the first quarter (Q1’2020) representing 29 per cent, quarter-on-quarter (q/q) increase when compared with the N716.26 billion borrowed in the fourth quarter of 2019

FG, however, borrowed less in the second quarter (Q2’2020) as the amount of TBs sold dropped by 36 per cent, q/q, to N593.7 billion.

But the volume spiked in Q3’2020, as the TBs sold on behalf of the FG shot up by 68 per cent, q/q, to N1 trillion, before falling by 39 per cent, q/q, to N614 billion in Q4’2020.

Analysis of matured TBs repaid showed that FG in Q1’2020 repaid N1.27 trillion. Matured TBs repaid, however, dropped by 63 per cent, q/q, in Q2’2020 to N470.6 billion.

The amount of TBs repaid picked up by 134 per cent, q/q, in Q3’2020 to N1.1 trillion before falling by 21 per cent, q/q to N864.4 billion in Q4’2020.

The analysis further showed that the N3.2 trillion borrowed by the FG through TBs in 2020 represents 60 per cent more than the N2 trillion borrowed through the monthly FGN Bond sale by the Debt Management Office (DMO).

This reflects the impact of a sharp fall in yields on TBs on the borrowing activities of the FG from the domestic market in 2020.

The analysis showed that the average interest rate on freshly issued TBs also known as Primary Market bills fell to 0.09 per cent in December 2020 from 4.8 per cent in December 2019. This represents 4,746 basis points (bpts) decline. This was compounded by the exclusion of local investors from the secondary market (Open Market Operations) TBs.

As a result, FG paid less interest on TBs borrowing in the nine months ended September 2020. Data from DMO showed the FG paid N253 billion as interest on TB borrowings from January to September 2020, down by 6.6 per cent from N271 billion paid in the corresponding period of 2019.