More than N667 billion worth of unsuccessful transactions were recorded at the Nigerian Treasury Bills (T-Bills) auction conducted Wednesday by the Central Bank of Nigeria (CBN) on behalf of the Federal Government of Nigeria (FGN) as excess liquidity drag for limited investments instruments.
With the shortage in attractive investment opportunities in Nigeria amid the low yield environment, fixed-income investors who participated in the T-bills auction were more concerned about their exposure to risk than the return on their investment as they offer rates lower than the double-digit inflation rate.
“There is strong liquidity in the market but not enough investment vehicles,” Ayorinde Akinloye, a research analyst at CSL stockbrokers said.
Investors bid at rates as low as 0.18 percent, 0.4 percent and 2.3 percent on the 91-day, 182-day and 364-day bills respectively.
Subsequently, the apex bank settled it stop rates at 0.34 percent, 0.5 percent for the 91-day, and 182-day maturities, and 0.98 percent for the longer 364-day instrument, a further drop from the previous stop rates auction of 1percent each recorded for the 91-day and 182-day and the 2 percent for the 364-day in the previous auction.
With a 30 month-high inflation rate at 13.71 percent in September, real return on investment for T-bills plunged to -13.37 percent for the 92-day instrument, -13.21percent for both the 182-day maturity while the longer 364-day instrument has real return of -12.73 percent.
The stop rates reported in the auction results from the Nigerian treasury bills primary market for the week, 28, October 2020 is the least BusinessDay has reported since it started tracking the data in August 2016.
“I think the question now is that will investors still bid at 0.01%? You can see the aggressiveness in the range of bids. It’s ridiculous.” Ayodeji Ebo, Senior Economist/Head, Research & Strategy, Greenwich Merchant Bank said.
Investors jostled for the N154.37 billion the CBN sought to raise at the auction with N821.49 billion, meaning investors oversubscribed by a whopping N667.12 billion, the highest unsuccessful bids BusinessDay have tracked so far.
Further analysis of the auction result revealed that the 92-day medium-term paper was oversubscribed by almost 11 times as N77.39 billion bids were reported to be unsuccessful. The Central Bank raised N7.5 billion in the 182-day instrument but investors were willing to subscribe with N84.89 billion.
While investors were willing to subscribe to the 182-day instrument with N41.64billion the CBN only allotted N6 billion, meaning N35.62 billion was recorded as unsuccessful bids.
Also, the apex bank only sold N140.87 billion worth of bills for the 364-day paper, five times less the amount investors were willing to invest for the instrument.
Investors jostled with a subscription worth N694.96 billion and thus, N554.09 bounced back as unsuccessful bids.
“Opportunities to put money into right now are limited,” Obinna Uzoma, chief economist at EUA Intelligence said adding that more money is therefore parked in treasury Bills.
