Treasury Bills Stop Rates Further Fall to 4%

By Dipo Olowookere

The downward review of the stop rates of treasury bills by the Central Bank of Nigeria (CBN) at the primary market continued on Wednesday, December 18, 2019.

Business Post reports that the apex bank further slashed the rates to as low as 4 percent during the primary market auction today, where the debt instrument worth N7 billion was offered to mainly local investors.

The bills were sold in three tenors, with N2 billion worth of the 91-day bill offered for sale, another N2 billion worth of the 182-day bill auctioned and N3 billion worth of the 364-day bill floated by the central bank.

From results of the exercise, the bills were oversubscribed as the CBN received offers valued at N100 billion. An analysis showed that traders staked N24.7 billion on the three-month instrument, N18.7 billion on the six-month instrument and N56.6 billion on the 12-month instrument.

But when the allotments were made, the central bank sold N2 billion worth of the 91-day bill, N2 billion worth of the 182-day bill and N3 billion worth of the 364-day bill to market participants.

For the stop rates, the apex bank cleared the 91-day instrument at 4.00 percent, lower than 5.00 percent it offered last week; the 182-day instrument cleared at 5.00 percent, lower than 6.19 percent at the previous session; while the 364-day instrument cleared at 5.50 percent, lower than 6.88 percent at the last exercise.

Business Post reports that on the average, the treasury bills stop rates in Nigeria are now at 4.83 percent, lower than 6.02 percent.

The next auction is expected two weeks’ time, precisely on Thursday, January 2, 2020 and if this trend continues, the debt instrument could be issued at 3.00 percent by the apex bank.

It is important to note that stop rates of OMO bills are still at double digits. As at the last exercise on Monday, the central bank issued the long-dated maturity at 13.28 percent. Another OMO auction is anticipated on Thursday (tomorrow) and the rates are expected to remain unchanged.

The CBN has continued to lower treasury bills rates at the primary market to spur lending in the real sector of economy, while those for OMO bills are left high to attract foreign investors so as to boost the nation’s foreign reserves, which dropped below $40 billion some weeks ago.