Nigeria’s 1yr T-bill six times oversubscribed despite liquidity squeeze

Nigeria attracted six times more cash than it planned to raise from the sale of one-year Treasury Bills on Wednesday despite a liquidity squeeze that muted the interest of local banks.

Investors staked a total of N725 billion on the one-year bill versus the N122 billion that was offered. Nigeria eventually sold N334 billion at a yield of 26.1 percent, the same interest rate as the last auction.

The oversubscription of the one-year treasury bill was despite the liquidity squeeze in the market. Total subscriptions at the auction was N757 billion, the lowest level this year.

“The banks are not so buoyant in terms of liquidity and couldn’t pull their weight in the auction, that’s why subscription levels were low compared to the previous auctions and CBN had to maintain elevated yields,” Oladipo Samuel, portfolio manager at Lead Asset Management Limited, an asset management company.

Over double of the N7.8 billion offered in the 91-day bill was demanded, and N16.5 billion sold.

The CBN sold a total of N362.45 billion across all tenors, more than double the N142.45 billion it offered.

The yield on the 182-day bills and 91-day bills were also maintained at 18.58 and 16.93 percent respectively

Samuel said the market was really tight currently, as the Standing Lending Facility window has been over a trillion for the past two days.

The Standing Lending Facility (SLF) is a line of short-term credit available for commercial banks to draw on when they need to meet immediate short-term withdrawals from their customers.

In March the Monetary Policy Committee raised interest rate by 200bps to 24.75 from 22.75 percent and increased the asymmetric corridor to +100bps/-300 basis points.

Similarly Joshua Joseph, fixed income analyst at CSL Stockbrokers said that the liquidity in the market is very low.

“As at close of business Tuesday, liquidity was a negative of N800 billion. On Monday banks tapped into the SLF window to get about N1 trillion and that resulted in the negative we saw,” Joseph said.

CBN data shows that the SLF was at N1.05 trillion as of Wednesday.

“A lot of banks have been borrowing from the SLF window and when a bank is exposed to SLF it can’t go for auctions, because the CBN won’t allow it,” Samuel said.