By Dipo Olowookere
The primary market auction (PMA) for treasury bills is expected to be very busy today, Wednesday, November 23, 2022.
This is because the sale of the T-bills is coming a day after the Central Bank of Nigeria (CBN) raised the country’s benchmark interest rate by one per cent to 16.5 per cent from 15.5 per cent.
At the end of its last Monetary Policy Committee (MPC) meeting for 2022 on Tuesday, November 22, the governor of the central bank, Mr Godwin Emefiele, said the team agreed “to continue to tighten [the rate], but at a somewhat lower rate, noting that tightening the stance of policy would narrow the negative real effective interest margin and thus improve market sentiment and further restore investor confidence.”
Today, the CBN is expected to auction treasury bills valued at N212.82 billion to traders at the market, with N2.28 billion for the 91-day bill, N1.25 billion for the 182-day bill, and N209.29 billion for the 364-day bill.
At the last exercise, which was held two weeks ago, the bank left the stop rates of the short and mid-term instruments unchanged but lowered the stop rate of the long-term bill by 0.51 per cent. As a result, the rates cleared at 6.50 per cent, 8.05 per cent, and 13.99 per cent, respectively, for the three-month, six-month, and 12-month bills.
With the fresh rate hike yesterday, investors would expect the apex bank to increase the stop rate to make the debt instrument attractive and keep the subscription rate high.
This week, the Debt Management Office (DMO) announced a subscription for the Series V of the sovereign Sukuk worth N100 billion offered to subscribers at 15.64 per cent.
With this in mind and to attract investors, the CBN is anticipated to increase the treasury bills stop rate to 15 per cent as traders hunt for investment tools with returns closer to the inflation rate of 21.09 per cent.
As the MPC pointed out yesterday, the MPR was raised to narrow the negative real effective interest margin, which is currency at -4.59 per cent.