Nigeria’s One-Year Treasury Bill Clears at 14.5% at PMA Amid Low Demand

By Dipo Olowookere

Treasury bills investors got the investment tool at a rate higher than they bought two weeks ago as the Central Bank of Nigeria (CBN) further increased the stop rates across the tenors to retain its demand.

However, it was observed that despite this action, the exercise was marred by a low appetite for the asset class, and traders weighed the macroeconomic risks, especially in the foreign exchange (FX) market, as it erodes the gains in Naira investments.

At the primary market auction (PMA) held on Wednesday, the apex bank came with high hopes by offering a total of N240.26 billion worth of the T-bills to traders across the three maturities. However, investors were not ready to tie down their funds in the debt instrument as they looked forward to the Monetary Policy Committee (MPC) slated for next month.

At the last two meetings, the MPC raised the interest rates first from 13.0 per cent to 14.0 per cent and at the second meeting, it was moved to 15.5 per cent to tame rising inflation in the country.

Last Monday, the National Bureau of Statistics (NBS) said inflation in September 2022 increased by 20.77 per cent compared with 20.52 per cent a month earlier. With this in mind, analysts are projecting another rate hike next month. Armed with this information, investors are slowing down in treasury bills investment with hopes of getting better rates after the next MPC meeting.

At the exercise yesterday, subscriptions worth N109.57 billion were received by the central bank from subscribers, with N109.19 billion sold to traders, who are majorly institutional investors.

A breakdown showed that of the N31.69 billion worth of the 91-day bill auctioned during the session, only N2.12 billion was staked by traders, forcing the CBN to allot N1.74 billion at 6.50 per cent compared with the 6.47 per cent of the preceding PMA.

Business Post reports that the bank went to the market with N58.23 billion worth of the 182-day paper but only got bids valued at N10.61 billion, with N10.12 billion allotted to successful bidders at 8.05 per cent, higher than the 7.90 per cent the same bill cleared two weeks ago.

For the 364-day bill, the CBN auctioned N150.34 billion but received subscriptions worth N124.23 billion and allotted N97.33 billion at 14.50 per cent as against the previous exercise’s 13.00 per cent.