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Nigeria Orders Banks to Fund Bids at Auction or Face Penalties - BLOOMBERG

OCTOBER 21, 2019

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  • Central bank has noticed ‘high level’ of unfunded demand

  • Sanctions may include canceling bids, central bank says

The headquarters of the Nigerian central bank in Abuja, Nigeria.

The headquarters of the Nigerian central bank in Abuja, Nigeria.

Photographer: George Osodi/Bloomberg

Nigeria’s central bank ordered lenders 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 Oct. 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% to help support the naira.

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