CBN Cuts One-Year Treasury Bill Rate to 2.80% from 3.05%

By Dipo Olowookere

The stop rate for the one-year treasury bills was on Wednesday reduced to 2.80 per cent from 3.05 per cent during the primary market auction (PMA).

The strong appetite for the tenor contributed to the reduction in the rate yesterday by the Central Bank of Nigeria (CBN), which conducted the exercise on behalf of the Nigerian government.

Business Post reports that N86.4 billion worth of the 12-month maturity was auctioned at the session but the subscription level was exceedingly high, which made the apex bank to make the significant rate cut.

According to details of the exercise, subscribers staked N317.3 billion on the bill, indicating a subscription level of 367.3 per cent but only N106.4 billion worth of the maturity was allotted to investors after the auction.

The one-year T-bills was not the only tenor offered for sale yesterday by the central bank as there were the two other usual maturities; 91-day and 182-day bills.

The CBN offered for sale N10.0 billion worth of the three-month bill and N17.6 billion worth of the six-month bill. However, these two tenors did not receive the huge interest the 12-month instrument had.

From results of the exercise, only N11.8 billion was staked on the 91-day bill, while the 182-day bill got subscriptions valued at N19.2 billion.

Despite the slightly low subscription rate for these two maturities, the central bank still sliced their stop rates during the session.

While the CBN allotted the exact amount it offered for sale for the 91-day and 182-day instruments, it cut the rates to 1.08 per cent and 1.49 per cent respectively.

At the previous PMA, the stop rate of the three-month instrument cleared at 1.09 per cent, while that of the six-month bill cleared at 1.50 per cent.

Recall that last month, the CBN, after its Monetary Policy Committee (MPC) meeting, announced a cut in the benchmark interest rate in the country, the Monetary Policy Rate (MPR), to 11.50 per cent from 12.50 per cent.

This subsequently reduced the annual interest rate on savings deposit in the country to 1.15 per cent at a time when the inflation rate (for August 2020) jumped by 13.22 per cent, according to the National Bureau of Statistics (NBS) and recession is just at the doorstep knocking after the gross domestic product (GDP) for the second quarter of the year slipped by 6.1 per cent.