CBN sells N161.5 billion in Treasury Bills, as investors seek higher returns, longer maturities

The Central Bank of Nigeria (CBN) has sold N161.5 billion worth of Nigerian Treasury Bills (NTBs) across various maturities at its auction on March 13, 2024. 

The sale indicates continuing confidence among investors in the Nigerian government’s debt instruments.  

Details of the Auction 

Here are the details of the auction: 

• For the shortest tenure of 91 days, the CBN offered N728.17 million, with the total subscriptions coming in at N85.51 billion. From this, N5.73 billion was allotted with a stop rate of 16.239%, signalling strong investor demand for short-term securities. 
• The 182-day bills saw an offer of N918.38 million and garnered subscriptions worth N49.65 million, resulting in an allotment of N4.92 billion. Notably, the stop rate for these mid-term bills was set at a flat 17.000%, hinting at market expectations for a stabilised rate environment over the coming months. 
• Demonstrating the highest demand, the 364-day bills had an offer of N159.85 billion, with a subscription of N1.36 trillion, far exceeding the other tenors. However, the CBN allotted N150.85 billion at a stop rate of 21.1240%, indicating investors’ willingness to hold longer-term bills despite a higher yield reflecting the risk premium for extended maturities. 

More Insights 

• By tightening monetary policy through higher interest rates and large treasury bill auctions, the CBN aims to curb inflation and stabilise the exchange rate, thereby fostering a more balanced economic environment.  
• The total sale of N161.5 billion in NTBs underscores a robust appetite for Nigerian sovereign instruments, with a significant over-subscription, especially in the longer tenor, suggesting that investors are looking for higher returns and are willing to engage with longer maturity profiles. 
• The variation in stop rates across tenors also offers insight into investor sentiment regarding short-, medium-, and long-term economic outlooks. 
• While the lower stop rate on the 182-day bill suggests anticipation of stable interest rates, the higher stop rate on the 364-day bill could imply a cautious stance towards potential future economic volatilities. 
• Investors’ diversified demand across the different maturities of treasury bills reflects strategic positioning for various investment horizons and signals a healthy trading environment in the Nigerian debt market. 

 (Nairametrics)