Following the banking sector crisis, which almost led to the collapse of some financial institutions, commercial banks in the country have continued to invest heavily in risk-free fixed income securities.
Research showed that a total of N2.673 trillion was invested in treasury bills by banks in 2011. The figures were collated from the 2011 annual reports of 16 banks in the country, excluding Keystone Bank, Enterprise Bank, Mainstreet Bank and Citibank.
Investigation showed that Zenith Bank Plc, Guaranty Trust Bank Plc (GTBank), First Bank of Nigeria Plc (FBN) and Fidelity Bank Plc made the largest investments in treasury bills in 2011 in the industry.
For instance, Zenith Bank purchased a total of N494 billion treasury bills in the period under review. While the amount invested in treasury bills by Zenith represented 23 per cent of the bank’s total assets, 31 per cent of its customer deposit and 64 per cent, relative to its loans and advances.
Zenith was closely followed by GTBank, which plunked down N235 billion in treasury bills. Similarly, the amount invested by GTBank in TBs relative to its total assets, customer deposit and loans and advances was 15 per cent, 24 per cent and 34 per cent respectively in the year under review.
Similarly, findings showed that FBN staked a total of N186 billion on treasury bills. This however was only 7.56 per cent of its total assets of N2.463 trillion as at the end of 2011. But the amount reflected 10.4 per cent and 16.5 per cent of its customer deposit and loans and advances.
Fidelity also invested a total of N150 billion of its funds in treasury bills in the year under review. The amount represented 20.3 per cent of its total assets, 27 per cent of its customer deposits and 59 per cent of its loans and advance.
Further research showed that of its total assets of N1.655 trillion at the end of 2011, United Bank for Africa Plc invested 5.93 per cent or N98 billion in treasury bills. The amount also amounted to 8.1 per cent of its customer deposits.
Also, Diamond Bank invested a total of N85.383 billion in treasury bills in 2011, followed closely by Standard Chartered Bank, which also staked a total of N66 billion on the risk free asset.
In the same vein, while Stanbic IBTC invested a total of N60 billion on treasury bills in the year under review, Unity Bank Plc – N31 billion while Skye Bank invested N29 billion in the fixed income securities.
Head of Research, Sterling Capital Limited, Mr. Sewa Wusu, attributed the rising appetite for TBs to the high yield and low risk. He also explained that banks invest in treasury bills to fulfill statutory requirement by the banking sector regulator.
Head of Research, Sterling Capital Limited, Mr. Sewa Wusu, attributed the rising appetite for TBs to the high yield and low risk. He also explained that banks invest in treasury bills to fulfill statutory requirement by the banking sector regulator.
“Basically, treasury bills are fixed income securities and banks invest in them to fulfill their statutory obligations as financial institutions. The rules state that some part of their assets should be kept in near cash instruments and treasury bills is one of such.
“Also, the yields on treasury bills are high and they are risk-free. So capital is not lost.
“Today, because of the high yield on Nigerian treasury bills, lots of foreign investors are taking advantage of the market,” Wusu explained.
He however acknowledged that this has continued to inhibit the flow of credit to the real sector.
He however acknowledged that this has continued to inhibit the flow of credit to the real sector.
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