CBN raises N284.26 billion from yield-hungry investors in latest T-Bills auction

The Central Bank of Nigeria (CBN) raised N284.26 billion from yield-hungry investors in its latest Nigerian Treasury Bills (NTBs) auction on Wednesday, June 26, 2024.

According to the auction result by the Debt Management Office (DMO), the auction attracted significant investor interest, with the total subscription amounting to N773.98 billion, far surpassing the total offer of N228.72 billion.

As an instrument to implement monetary policy, the CBN can control the money supply in the economy by issuing or redeeming Treasury Bills (T-Bills). Also, T-Bills provide a means for the government to raise short-term funds to finance its operations, including bridging budget deficits.

In the latest auction, there was an increase of 417.1% in the amount offered when compared to the N44.23 billion offered in the previous auction, which was held on June 13, 2024.

Also, total subscriptions recorded 89.8% increase from N407.76 billion while total sales rose by 414.7% from N55.23 billion.

The latest auction saw a significant subscription rate, surpassing the offer amount across all tenors, indicating robust demand from investors.

What the data says

The auction featured three tenors: 91-day, 182-day, and 364-day bills.

• The 91-day tenor, maturing on September 25, 2024, had an offer of N29.83 billion but received subscriptions worth N36.29 billion, with an allotment of N28.15 billion. The range of bids for this tenor was between 15.98% and 24.00%, with a stop rate of 16.30%.
• The 182-day bills, maturing on December 25, 2024, saw an offer of N30.67 billion against subscriptions of N40.58 billion, and an allotment of N36.44 billion. The bid range was between 17.00% and 21.00%, with a stop rate of 17.44%.
• The 364-day bills, maturing on June 25, 2025, had the highest offer at N168.21 billion. It recorded an overwhelming subscription of N697.11 billion and an allotment of N219.67 billion. The bid range for this tenor was 16.00% to 25.00%, with a stop rate of 20.68%.

What you should know

The significant oversubscription across all tenors demonstrates strong investor confidence in Nigerian Treasury Bills as a safe investment avenue amidst prevailing economic conditions.

The high subscription rate, particularly for the 364-day bills, reflects a preference for longer-term securities, likely driven by expectations of future economic stability and favourable returns.

The range of bids and the stop rates across the different tenors suggest competitive bidding, with investors keen on securing these government securities.

The stop rates indicate the yield investors are willing to accept, and the competitive rates achieved in this auction are indicative of the NTBs’ attractiveness.

Nairametrics earlier reported that Nigeria recorded a total NTB debt of N10.4 trillion in the first quarter of 2024, a 60% rise in just three months.

This surge occurred as the DMO, via the central bank, issued several T-Bills in Q1 2024 as it relies on a combination of monetary and fiscal policy to fight inflation while also providing a source of funding to meet the government’s short-term expenditure.