By Dipo Olowookere
The Central Bank of Nigeria (CBN) on Wednesday conducted a primary market auction (PMA) for the sale of treasury bills to investors, with the rates tampered with.
At the exercise, the central bank offered for sale N90.94 billion worth of the debt instruments across three different maturities.
Business Post reports that N1.80 billion worth of 91-day bill, N4.50 billion worth of 182-day bill and N84.64 billion worth of the 364-day bill were auctioned at the PMA.
However, the bills were oversubscribed by about 195 percent, reflecting the confidence market participants have in the government’s debt instrument and its ability to repay at maturity despite the global health challenges, which has affected its revenue sources.
An analysis of the bids showed that investors staked N21.68 billion on the 91-day instrument, N40.29 billion on the 182-day instrument and N114.97 billion on the 364-day instrument, bringing the total bids to N176.94 billion.
The central bank, when allotting the bills, raised the amount for the three-month and six-month instruments, but lowered the amount for the one-year maturity.
The CBN allotted N4.40 billion for the 91-day bill, N7.82 billion for the 182-day bill and N78.71 billion for the 364-day bill, amounting to N90.93 billion.
Also, the apex bank sliced the stop rates for the treasury bills yesterday, reducing the 91-day bill to 2.00 percent from the previous 2.45 percent. Stop rate for the 182-day instrument was cut to 2.20 percent from 2.72 percent, while the 364-day rate was left flat at 4.02 percent.
It was observed that the central bank capitalised on the huge interest investors showed at the exercise to effect a rate reduction.
If the level of interest is sustained, the CBN may further slice the stop rates when it conducts another PMA in the next two weeks. But it is most certain that the exercise witness higher percentage of subscription from market participants because of their appetite for T-bills.
Adedapo Adesanya