364-Day Treasury Bills Rate Rises to 1.21% at Primary Market

By Dipo Olowookere

The stop rate of the 364-day treasury bills slightly increased at the primary market auction (PMA) conducted by the Central Bank of Nigeria (CBN) on Wednesday.

At the exercise, the apex bank sold the tenor at 1.21 per cent in contrast to 1.14 per cent it sold the same maturity at the previous PMA.

According to details from the exercise, N44.8 billion worth of the bill were offered for sale, but investors staked N112.0 billion on the bill, with N44.8 billion allotted.

The one-year bill was not the only tenor yesterday as the CBN also sold the 91-day maturity and the 182-day tenor during the last PMA for the year 2020.

Business Post reports that N10.0 billion worth of the 3-month instrument was auctioned by the central bank, while N20.0 billion worth of the 6-month instrument was offered for sale.

It was observed that investors bid N30.6 billion for the short-term bill and bid N28.9 billion for the mid-term bill during the PMA, but the apex bank allotted the same amount it brought to the market for the respective tool.

However, the stop rates moved in different directions as the rate for the 91-day bill reduced to 0.04 per cent from 0.05 per cent, while the rate for the 182-day bill remained flat at 0.50 per cent.

The treasury bills space in Nigeria this year has been with surprises as the CBN significantly cut the stop rates as part of efforts to propel investments in the real sectors of the economy.

Before the rates dropped to single-digit, they used to be in double-digits, as high as 20 per cent. This attracted several investors, who saw an easy avenue to make a huge profit.

Also, banks were happy to pump customers’ deposits in T–bills, ignoring their major calling of lending to those who need money to expand their businesses.

The CBN, worried about this, quickly took an action to stop this. This led to the crashing of the rates to discourage dumping of funds in the fixed income asset.

Next year, the apex bank is expected to continue to play with the rates to moderate investment in the treasury bills market. This it will do by raising and lowering the rates at different times.