BREAKING: Tinubunomics:Nigeria’s treasury bills rate jumps to 13.9%

In the latest auction on August 23rd, 2023, investors tabled a bid of N1.5 trillion for one-year (364-day) treasury bills at a striking rate of 13.9% per annum.

However, only N283 billion was accepted from the bid, indicating the persistent trend of investors massively oversubscribing to these short-term risk-free investments.

The data has been sourced from the recent auction report detailing the sale of Nigeria’s treasury bills for the mentioned week. These one-year bills are set to mature on 22nd August 2024.

At 13.9% per annum, the one-year bill is trading at its highest since March and April when it closed at 14.74% and 14.4% respectively.

Nigeria’s Treasury Bills Chart 2022-2023

Rising Inflation: The inflation rate in Nigeria surged to 24.08% in July 2023. This marks a considerable increase from the 22.79% witnessed in June 2023, which was a 0.38% point rise from 22.41% in the month prior.

On a year-on-year comparison, the Headline inflation rate for June 2023 was notably 4.19% points greater than the rate recorded in June 2022, which stood at 18.60%.
Despite these conditions, there’s a persistent and growing demand for these risk-free investments, even though they offer a negative real return, especially when set against the backdrop of the current inflation rate.

What You Should Know

For the 182-day treasury bills, investors made a bid of a whopping N12.2 trillion against an offer of just N10.2 trillion. The entirety of the offer, N10.2 trillion, was accepted at an interest rate of 8%.

For the 91-day bills, the situation wasn’t much different. Investors bid an impressive N17.2 trillion against the central bank’s offer of N9.9 trillion, and an interest rate of 5.1% was accepted.

The maturity dates for these auctions are set as follows:

21st November 2023 for the 91-Day bill
21st February 2024 for the 182-Day bill
22nd August 2024 for the 364-Day bill.

Monetary Climate: It is noteworthy that the money supply for July 2023 remained stable, standing at over N64 trillion.

Financial analysts opine that the combination of lower interest rates and a high money supply is contributing factors to the observed exchange rate depreciations.