Nigeria Sells Treasury Bills to Investors at 1.80%

June 18, 2020
treasury bills investors
Image Credit: Corporate Finance Institute

By Dipo Olowookere

Treasury bills were sold to investors at the primary market auction (PMA) in Nigeria on Wednesday, June 17, 2020 for as low as 1.80 percent.

The rate was for the three-month tenor, which was offered to subscriber at the previous exercise held a week ago at 2.00 percent.

The Central Bank of Nigeria (CBN), which conducts the sale of the debt instrument on behalf of the Nigerian government, has continued to slice the interest rates of the T-bills, owing to the huge interest of investors.

The appetite for treasury bills in the country is high because of its risk-free nature. Instead of keeping money in the banks, where funds deposited are subjected to different charges by financial institutions, investors put their money in treasury bills and other risk-free investment tools like bonds, where they get steady income.

Yesterday, the apex bank went to the market with N14.6 billion worth of the T-bills, but the subscription level went as high as 610 percent as the total bids for the exercise stood at N89 billion. Much of this was for the one-year tenor.

An analysis of the exercise by Business Post revealed that the CBN offered for sale N2 billion of the 91-day bill, another N2 billion of the 182-day instrument and N10.6 billion of the 364-day bill.

When the subscriptions were viewed, investors staked N13.6 billion on the short-dated maturity, N15.2 billion on the mid-dated tenor and N60.2 billion on the long-dated maturity.

However, the central bank allotted to subscribers what it initially offered to sell to them; N2 billion for the 91-day bill, N2 billion for the 182-day bill and N10.6 billion for the 364-day bill.

And for the stop rates, the three-month instrument cleared at 1.80 percent in contrast to the previous 2.00 percent, the six-month tenor cleared at 2.04 percent versus the previous 2.20 percent, while the 12-month maturity cleared at 3.75 percent compared with the previous 4.02 percent.

It is projected that if the demand for the debt instrument continues, the apex bank will further be tempted to cut the rates at the next PMA.

Dipo Olowookere

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan.

Mr Olowookere can be reached via [email protected]

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