The Central Bank of Nigeria (CBN) at the just concluded liquidity mop-up has raised an estimated N1.8 trillion from Open Market Operation (OMO) and Nigerian Treasury Bills (NTBs) amid its efforts to tackle the inflation rate.
T-Bills, also called, are short-term debt securities issued by the government to make up for budget deficits and fund projects. OMO is designed to be a short-term market instrument that the CBN uses to control the money supply in the economy.
The auction results sighted by InsideBusinessNG revealed that CBN sold an estimated N1.16 trillion during the OMO auction on May 22, 2024, and sold N638.98 billion NTB when it conducted its auction on May 24, 2024.
The Monetary Policy Committee (MPC) of the CBN unanimously voted to increase the Monetary Policy Rate (MPR) by 150basis to 26.25 per cent, translating to a total rate increase of 750basis in 2024 as an inflation rate of 36.96 per cent in April 2024.
For the NTB auction, investors demonstrated robust demand with N1.59 trillion subscriptions across the three tenors at the 22 May 2024 auction.
However, they offered a total of N508.98 billion, with subscription levels significantly surpassing the initial offer, highlighting the continued appetite for fixed-income securities amidst a volatile economic landscape.
Despite the oversubscription, only about N638.98 billion was allotted to the NTB investors with the 364-day bill securing the most.
The 364-day treasury bills for 20.69 per cent in stop rates suggesting a true yield of about 26.1 per cent. NTB interest is paid upfront, thus the actual yield is higher than the nominal rates offered.
The heightened interest in treasury bills can be attributed to a spate of increases in the Monetary Policy Rate (MPR), which made government securities more attractive to yield-seeking investors.
In the 91-day NTBs segment, where investor interest was subdued, the CBN offered N331.01 billion as subscriptions, totalling only N124.92 billion, well below the amount on offer.
Eventually, only N60.69 billion was allotted, with the range of bids for this tenor spanning from 15.0000 per cent to 20.9410 per cent, and the stop rate settling at 16.5000 per cent.
This low subscription, and allotment compared to the offer, suggests preference by investors for longer-term securities.
For the 182-day treasury bills, the CBN’s offer stood at N9.3 billion and the subscriptions came in significantly higher at N33.21 billion, while the allotment was N28.46 billion.
The bid range for these bills varied between 16.8000 per cent and 22.0000 per cent, concluding with a stop rate of 17.4490 per cent.
The 364-day treasury bills attracted the most substantialinterest. Against an offer of N168.67 billion, subscriptions soared to N1.43 trillion, resulting in an allotment of N549.83 billion.
Bids for this category ranged from 18.5000 per cent to 26.6780 per cent, with a final stop rate of 20.6900 per cent.
For the OMO auction, the CBN offers bills worth N500.00 billion – N75.00 billion for the 95-day, N75 billion for the 179-day and N350.00 billion for the 361-day – to investors.
Demand was healthy as total subscription settled at N1.16 trillion (bid-to-offer: 2.3x), as the CBN allotted all available bids across the three tenors – N10.00 billion for the 95-day, N5.65 billion for the 179-day and N1.14 trillion for the 361-day – at respective stop rates of 19.00 per cent (previous: 18.99%), 19.74% (previous: 19.48%), 22.49 per cent (previous: 21.50%).
Analysts at Cordros Research stated that it anticipated yields in the NTB secondary market would likely rise from current levels, given the prospects of tight liquidity conditions in the financial system.
