CBN Offers One-Year Treasury Bills at 22.1% in July Auction

During its auction on July 24, the Central Bank of Nigeria (CBN) offered one-year Treasury Bills (T-Bills) at a stop rate of 22.1%.

This action is a reflection of the central bank’s continuous attempts to control inflation and regulate liquidity in the economy.

The entire amount that the CBN offered in this auction, divided among the various tenors, was N277.96 billion, according to the auction result.

Compared to the N229.72 billion offered at the last auction on June 26, 2024, this amounts to a 21.53% rise.

Together, these tenors subscribed for up to N373.95 billion, exceeding the amount offered and demonstrating the high demand and investor confidence in government securities. 

Nevertheless, compared to the N774.98 billion in total subscriptions reported in the auction the previous month, this represented a 51.68% decline.

The entire sales, or allotment, for the most recent auction, was N277.96 billion, a slight decrease of 2.22% from the N284.26 billion allotted the previous month.

The News Chronicles also noted that the amount awarded in the most recent sale is roughly comparable to what was given in the auction that came before.

The auction breakdown

Three distinct tenors of Nigerian Treasury Bills (NTBs) – 91-day, 182-day, and 364-day – were offered in the July 24, 2024, auction. 

The CBN made a N16.48 billion offer for the 91-day T-Bills. This tenor’s subscription, which was fully allocated, was N13.14 billion. For these bills, the bid rates ranged from 16.0000% to 18.5000%, and the stop rate was previously fixed at 16.3000%; at present, it is set at 18.5000%. With this adjustment, the genuine yield or return is increased by 2.2000% to 19.4125 percent.

Subscriptions for the 182-day NTBs reached N6.40 billion, which was somewhat less than the offer amount of N6.44 billion. The subscription amount was matched by the whole allotment. These bills had bid rates ranging from 17.0000% to 19.5000%; the stop rate was once 17.4400%, but it is currently at 19.5000%. This suggests a 2.0600% change, translating into a 21.6194% real yield or return.

As eager investors overloaded the one-year Treasury Bills, the 364-day T-Bills witnessed the highest offer amount of N255.04 billion, with a subscription of N354.40 billion. The N258.42 billion budget was set aside for these bills. The range of bid rates for this tenor was 20.0000% to 26.7700%. There has been a 0.8600% adjustment in the stop rate, which was previously set at 21.2400% and is now set at 22.1000%. A genuine yield or return of 28.3697% was obtained as a result.

What to note

The CBN’s plan to draw in more investors by providing competitive returns is demonstrated by the choice to sell one-year NTBs at such a high stop rate. 

This action is expected to assist the central bank in managing the banking system’s surplus liquidity, which is essential for containing inflation.

A preference for longer-term securities is evident in the high subscription rate, especially for the 364-day bills. This preference is probably due to hopes for future economic stability and good returns.

Investors are eager to acquire these government securities, as evidenced by the variety of bids and the stop rates across the various tenors.