In its most recent Treasury Bills auction, the Central Bank of Nigeria (CBN) auctioned an astounding N1.58 trillion as the top bank carried out its continuous mission to control liquidity in the banking system.
Investors showed a great deal of interest in the February 21 auction, with the CBN putting up stop rates as high as 19%.
Tenor-wise, the auction was divided into three groups: 91-day, 182-day, and 364-day bills.
The N11.96 trillion in 91-day bills that the apex bank was offering, along with a 17.00% stop rate, attracted a lot of short-term investors.
All tenors saw strong subscription numbers, indicating increased investor demand given the state of the economy.
The subscription for the 91-day bills was N368.03 billion, significantly more than the offer amount. This led to an allotment ratio of 27.7x, with N331 billion allocated for the bills.
This suggests that there were over 28 units sought for every unit offered, demonstrating the strong demand for short-term government securities.
The 364-day bills saw a massive N1.77 trillion subscription, resulting in an allocation ratio of 4.9x, but the 182-day bills saw a subscription of N98.69 billion, with an allotment ratio of 6.5x.
The 182-day and 364-day bills each received a total allocation of N66.2 billion and N1.19 billion, respectively.
The range of bids for the 91-day bills was 11.4400% to 21.0000%, for the 182-day bills it was 13.0000% to 20.3399%, and for the 364-day bills, it was 15.0000% to 26.0000%.
These ranges demonstrate the variation in investor expectations for yield, with some aiming for the higher end of the spectrum and others willing to accept lower rates.
The results of the most recent Treasury Bills auction, in which a whooping N2.3 trillion was staked by investors, exceeded the N1 trillion that was on offer. An interest rate of 19% was also applied to the one-year bill.
After 364 days of auctions, the CBN has now sold over N2.5 trillion, squeezing out over N2.1 trillion. The apex bank will likely have to pay roughly N398 billion in interest throughout these sales.
The CBN’s approach of tightening liquidity through these auctions aligns with its monetary policy stance, which is to stabilize the currency and reduce inflation.
The cost of borrowing will probably climb for everyone in the economy as a result of the higher interest rates on Treasury Bills.
Given the current state of uncertainty in the global economy, the CBN’s actions are crucial, and in the upcoming weeks, financial circles will undoubtedly debate their consequences.
