CBN Drops Interest Rates On 1-year Treasury Bills By 42.4 bps To 20.7% Amidst Robust Investor Confidence

CBN Drops Interest Rates On 1-year Treasury Bills By 42.4 bps To 20.7% Amidst Robust Investor Confidence

1 month ago
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In its latest move to manage liquidity and ensure stability in Nigeria’s financial market, the Central Bank of Nigeria (CBN) conducted an auction of Treasury bills (NT-bills) on April 12, 2024.

The auction witnessed a significant drop in the yield on the 364-day bills, from the previous 21.124% to 20.7%.

With a total offer of N149.64 billion worth 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, the CBN successfully sold N951.83 billion worth of bills. This represented a 42% decline from the N1.64 trillion sold during the March 27 auction.

The oversubscription during the auction reached an astonishing 1119%, with total subscriptions hitting about N1.824 trillion against the N149.64 billion offered.

Analysts believe that despite the decreased yield rates deviating from the raised monetary policy rate, investors continue to demonstrate confidence in Nigeria’s NT-bills.

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Adetola Freeman, a Regional Analyst at FBS Africa, commented on investors’ behavior, saying, “Investors are averse to other forms of investment. Most people would want to invest in foreign currencies or foreign markets but given that exchange rates have been dropping aggressively for a couple of weeks, I believe that a lot more investors have taken to NT-bills without considering what the yields are looking like.”

Freeman added, “For investors with a high-risk profile, 21% returns sounds very good.”

The auction details reveal an oversubscription across all bill categories. For the 91-day bills, subscriptions amounted to N27.34 billion, an 883.45% oversubscription from the N2.78 billion offered, while the stop rate remained at 16.24%, consistent with the previous auction.

Similarly, the 182-day bills recorded an oversubscription of 802.3%, with subscriptions reaching N27.27 billion, and the stop rate maintained at 17.00%.

The 364-day bills witnessed the highest oversubscription, at 1130%, with subscriptions hitting N1.77 trillion. Despite bids ranging between 19.00% and 25.00%, the stop rate was set at 20.7%, leading to successful bids worth N902.03 billion.

The success of another NT-bill auction by the CBN underscores investors’ trust in the instrument amidst prevailing economic challenges. It comes in the wake of the CBN’s decision to further hike the benchmark interest rate to 24.75% during the last Monetary Policy Committee meeting, in response to Nigeria’s inflation, which stood at 31.9% in February 2024.


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