By Dipo Olowookere
The hunger for treasury bills in Nigeria seems to be waning as the Central Bank of Nigeria (CBN) is offering the investment tool at an unattractive rate of 4.90 per cent, significantly below the country’s inflation rate of 15.40 per cent.
It is common knowledge that investing in any financial asset not yielding a return on investment of more than the inflation rate is a bad investment.
While some investment tools in the fixed income market like bonds and commercial papers are witnessing a rise in yields lately, the T-bills space is expressing the opposite and this is still due to an appetite for it.
Last week, the Debt Management Office (DMO) at the last minute slightly raised the coupon of the N250 billion Sukuk to 13.00 per cent from the initial 12.80 per cent to attract more investors.
This occurred after the Lagos State government sold bonds worth N137.3 billion to investors at the capital market at a coupon rate of 13.00 per cent.
On Wednesday, December 29, 2021, the CBN conducted the last primary market auction (PMA) for treasury bills and from the analysis, Business Post observed that the stop rate for the one-year instrument was further sliced by 0.10 per cent amid a slight decline in the demand for the debt instrument.
The CBN went to the market with N44.8 billion worth of the 364-day bill but received bids valued at N76.0 billion and allotted N48.1 billion at 4.90 per cent compared with 5.00 per cent at the previous exercise. The range of bids, according to details of the PMA, was from 4.39 per cent to 6.99 per cent.
But for the two other tenors, the central bank did not tamper with the rates as the 91-day bill and 182-day bill remained unchanged at 2.49 per cent and 3.45 per cent respectively.
The apex bank offered for sale N4.6 billion worth of the three-month maturity to investors but received subscriptions worth N2.8 billion and allotted N2.5 billion with the range of bids between 2.45 per cent and 5.25 per cent.
As for the six-month instrument, the CBN auctioned N3.3 billion but got bids valued at N3.5 billion and allotted N2.2 billion with the range of bids from 3.40 per cent to 6.75 per cent.
From the analysis, the central bank approached the PMA with treasury bills worth N52.7 billion but received offers valued at N82.3 billion and allotted N52.8 billion.
Though the T-bills were oversubscribed yesterday, the subscription level is gradually waning when compared with the previous exercises and this is due to the unattractive rates the apex bank is offering investors.
The CBN has gone through this route before and the rates dropped below this level before it went up again to almost a double-digit.
Adedapo Adesanya