CBN Sells N225b T-Bills as Funds Rate Crashes to 4.50%

By Dipo Olowookere

On Wednesday, the Central Bank of Nigeria (CBN) conducted the last primary market auction for the month of January 2019.

This made the secondary market to be scantily traded as demand interests were focused at the NTB auction, leaving the yields to compress by 0.10 percent on the back of improved system liquidity levels which fostered some buying interests on the short-end of the curve.

During the PMA exercise yesterday, the apex bank raised a total of N225 billion from investors, who subscribed to the sale of the fresh treasury bills.

The amount made from the PMA was what was offered by the central bank, which borrowed the money on behalf of the Nigerian government.

Business Post reports that the debt instruments were offered in three different maturities at the exercise yesterday and while the short and long-tenor papers were oversubscribed by market players, the mid-maturity received a fair subscription.

Of the N7.85 billion worth of the 91-day bill, subscriptions valued at N41.05 billion were received with N28.02 billion eventually allotted at 11.00 percent.

The N177.22 billion worth of the 364-day bill received N214.38 billion subscriptions, but only N167.93 billion was allotted at 15.00 percent.

For the N69.57 billion worth of the 182-day bill, offers valued at N68.42 billion were received with N58.68 billion allotted at 13.50 percent.

According to analysts at Zedcrest Research, the market is expected “to trade on a relatively flat note as the CBN is expected to float a sizeable auction on the back of the robust system liquidity levels of N300 billion and expected inflows from OMO maturities of N191 billion.

Meanwhile, the cost of funds depreciated broadly at the money market on Wednesday to a single digit from double digits.

The overnight bank lending rate crashed to 4.50 percent from 10.83 percent, while the Open Buy Back (OBB) rate fell to 3.83 percent from 10.17 percent.

The drop in the rates was buoyed by the significant rise in system liquidity caused by the inflows from FAAC payments in the previous session.

However, the funding rates are anticipated to increase today if the apex bank conducts a sizeable OMO auction to mop up the excess system liquidity and expected OMO inflows.