CBN sells another N1.58 trillion in Treasury Bills, interest rate at 19% for 364-day bill

The Central Bank of Nigeria (CBN) has sold an impressive N1.58 trillion in its latest Treasury Bills auction as the apex bank continues its ongoing effort to manage liquidity in the financial system.

The auction, held on the 21st of February, attracted substantial interest from investors, with the CBN setting stop rates as high as 19%.

The auction was broken down into three categories based on tenors: 91-day, 182-day, and 364-day bills.

The apex bank offered N11.96 trillion in 91-day bills, with a stop rate of 17.00%, which was a significant attraction for short-term investors.

The 182-day bills saw N10.21 trillion on offer at a 17.50% stop rate, while the 364-day bills had the highest rate at 19.00% on a N243.32 trillion offer.

Allotments

Subscription levels were robust across all tenors, reflecting heightened investor appetite amidst the current economic landscape.

• The 91-day bills received a subscription of N368.03 billion, far exceeding the offer amount, which resulted in an allotment ratio of 27.7x with N331 billion allotted.
• This indicates that for every unit offered, there were almost 28 units requested – a clear sign of the high demand for short-term government securities.
• The 182-day bills had a subscription of N98.69 billion, with an allotment ratio of 6.5x, while the 364-day bills witnessed a whopping N1.77 trillion subscription, leading to an allotment ratio of 4.9x.
• A total of N66.2 billion and N1.19 billion were allotted for the 182-day and 364-day bills respectively.

Bids ranged from 11.4400% to 21.0000% for the 91-day bills, 13.0000% to 20.3399% for the 182-day bills, and 15.0000% to 26.0000% for the 364-day bills.

These ranges show the variability of investor expectations regarding yield, with some investors willing to accept lower rates, while others aimed for the higher end of the spectrum.

A total of N2.5 trillion sold in two weeks

This recent Treasury Bills auction mirrors the outcomes of the last auction where a total of N1 trillion was on offer but was oversubscribed as investors staked a whopping N2.3 trillion. The one-year bill also attracted a 19% interest rate.

• The CBN has now sold about N2.5 trillion in the last two weeks sucking out over N2.1 trillion in 364-day auctions likely to cost the apex bank around N398 billion in interest payments.
• The CBN’s strategy to tighten liquidity through these auctions is consistent with its monetary policy stance aimed at curbing inflation and stabilizing the currency.
• The increased interest rates on Treasury Bills are likely to influence borrowing costs across the economy.

The CBN’s moves are critical amidst the current global economic uncertainties, and their implications are sure to be a point of discussion in financial circles in the coming weeks.