CBN sells one-year Treasury Bills at 22.1% in July auction

The Central Bank of Nigeria (CBN) has sold one-year Treasury Bills (T-Bills) at a stop rate of 22.1% during its July 24 auction. 

This move reflects the central bank’s ongoing efforts to manage liquidity and control inflation in the economy. 

According to the auction result, the total amount offered by the CBN in this auction was N277.96 billion spread across the different tenors.

This represents an increase of 21.53% from N229.72 billion offered in the previous auction of June 26, 2024. 

The total subscription amount for these tenors combined was up to N373.95 billion, exceeding the amount offered and reflecting strong investor confidence and demand for government securities.

However, this was a decrease of 51.68% from N774.98 billion total subscriptions recorded in the previous month’s auction. 

At the latest auction, the total sales, or allotment, for the auction amounted to N277.96 billion, which is a marginal decline of 2.22% from the N284.26 billion allotted last month. 

Nairametrics further observed that the amount allotted in the latest auction is approximately similar to what was offered in the previous auction. 

Auction breakdown 

The auction, held on July 24, 2024, offered three different tenors of Nigerian Treasury Bills (NTBs): 91-day, 182-day, and 364-day. 

• For the 91-day T-Bills, the CBN offered an amount of N16.48 billion. The subscription for this tenor was N13.14 billion, which was fully allotted. The range of bid rates for these bills was between 16.0000% and 18.5000%, with the current stop rate set at 18.5000%, up from the previous stop rate of 16.3000%. This change represents an increase of 2.2000%, resulting in a true yield or return of 19.4125%. 

• The 182-day NTBs had an offer amount of N6.44 billion, with subscriptions reaching N6.40 billion, slightly less than the amount offered. The total allotment matched the subscription amount. Bid rates for these bills ranged from 17.0000% to 19.5000%, with the current stop rate at 19.5000%, a rise from the previous stop rate of 17.4400%. This indicates a change of 2.0600%, providing a true yield or return of 21.6194%. 

• The 364-day Treasury Bills saw the highest offer amount of N255.04 billion, with a subscription of N354.40 billion, as hungry-yield investors oversubscribed the one-year T-Bills. The allotment for these bills was N258.42 billion. Bid rates for this tenor ranged from 20.0000% to 26.7700%. The current stop rate was set at 22.1000%, up from the previous stop rate of 21.2400%, marking a change of 0.8600%. This resulted in a true yield or return of 28.3697%. 

What you should know 

The decision to sell one-year NTBs at such a high stop rate highlights the CBN’s strategy to attract more investors by offering competitive returns. 

This move is anticipated to help the central bank manage excess liquidity in the banking system, which is a critical factor in controlling inflation. 

The high subscription rate, particularly for the 364-day bills, reflects a preference for longer-term securities, likely driven by expectations of future economic stability and favourable returns. 

The range of bids and the stop rates across the different tenors suggest competitive bidding, with investors keen on securing these government securities.