The Central Bank of Nigeria (CBN) sold N65.03 billion worth of one-year treasury bills at 24.77 percent as a result of a small auction size.
The amount sold was double the N30.7 billion offered by CBN, yet lower than the N251.68 billion offered by investors.
This led to the yield on the one-year bill dropping to 24.77 percent from 24.9 percent at the previous auction.
Matilda, a fixed-income trader at Meristem Securities, said that usually, the auction size in September is typically small.
Despite tight system liquidity, the CBN received subscription bids nearly four times the N81.9 billion auctioned across all tenors. This marked the lowest auction total for the year.
“So we can attribute the rate drop to the fact that borrowing was lower and there was no incentive to raise rates since the CBN was not borrowing so much, so why add so much premium,” she added.
The auction saw a downward move in stop rate to 19.86 percent from 20.0 percent in the previous auction for the one-year bill.
Unlike the one-year bills, shorter dated instruments were met with poor investors’ appetite.
As the 91-day bill saw only 57 percent subscription of the N28.46 billion amount offered and N12.95 billion was sold. while the 182-day bill got less than a quarter of the N22.67 billion offered in subscription and only N3.9 billion sold.
For the 182-day and 91-day bills, stop rates remained the same aa the last auction at 17.5 percent and 17.0 percent respectively.
The Cardoso-led Monetary Policy Committee has jacked up the interest rate by 850 basis points to 27.25 percent from 18.75 percent at the start of the year to combat rising inflation, this has led to an equal increase in the yields of Treasury bills compared to last year.
Stop rates went from an average of 8 percent in 2023 to an average of 16 percent this year on the one-year T-bills.
