On April 12, 2024, the Central Bank of Nigeria (CBN) conducted its latest auction of Treasury bills (NT-bills), witnessing a decline in the yield on the 364-day bills to 20.7% from the previous 21.124%.
The auction resulted in the successful sale of N951.83 billion worth of bills, marking a 42% decrease from the N1.64 trillion sold during the March 27 auction.
During the auction, the CBN offered N149.64 billion of NT-bills, comprising N2.78 billion of the 91-day bills, N3.02 billion of the 182-day bills, and N143.84 billion of the 364-day bills. Despite this, the CBN recorded an oversubscription of 1119%, with total subscription reaching about N1.824 trillion against the N149.64 billion offered.
For the 91-day bills, the total subscription received was N27.34 billion, indicating an 883.45% oversubscription from the N2.78 billion offered. The rates of the subscriptions ranged between 15.00% and 17.50%, with the CBN selling N27.11 billion at a stop rate of 16.24%, consistent with the March 27 auction.
Similarly, the 182-day bills saw an oversubscription of 802.3%, with subscription hitting N27.27 billion. Bids ranged between 16.00% and 21.00%, but the stop rate remained at 17.00%, matching the previous auction. The CBN sold N22.67 billion of the 182-day bills.
As for the 364-day bills, there was an 1130% oversubscription, with subscription reaching N1.77 trillion. Despite bids ranging between 19.00% and 25.00%, the stop rate was set at 20.7%, resulting in successful bids of N902.03 billion.
The successful NT-bill auction reflects investors’ confidence in Nigeria’s NT-bills, despite the decrease in yield rates diverging from the raised monetary policy rate. Adetola Freeman, Regional Analyst at FBS Africa, commented on investors’ preferences, stating that many are turning to NT-bills due to the drop in exchange rates, disregarding the yield rates.
Freeman added, “For investors with a high-risk profile, 21% returns sounds very good.”
It’s worth noting that during the last Monetary Policy Committee (MPC) meeting on March 25 and 26, the CBN raised the benchmark interest rate to 24.75% in response to Nigeria’s 31.9% inflation rate in February 2024.
