Nigeria’s one-year treasury bills (T-bills) yield increased to 26.02 percent, at the primary auction Wednesday, as authorities continue on the path of aggressive monetary tightening.
The yield on the long end of the curve increased to 26.02 percent from 24.77 percent, the highest since August.
A total of N374.67 billion worth of maturing treasury bills was rolled over by the Central Bank of Nigeria (CBN) on Wednesday, October 23.
The apex bank sold N374.67 billion worth of the one year bills despite seeing subscriptions worth N489.93 billion.
Analysts at Meristem had previously projected an increase in yields on the one-year bills due to the increase in size of the auction.
“This higher borrowing requirement, particularly concentrated in the 364-day instrument, could spur the CBN to offer a higher premium,” analysts at Meristem stated in its recent report.
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Today’s auction of N374.67 billion, is significantly higher than the N81.09bn from the previous auction representing the highest borrowing level since August 2024.
Recent total subscription levels at the last three auctions were N81.09 billion N273.28 billion and N304.27 billion, indicating strong demand mostly on the one-year bills.
The system currently had a net liquidity position of negative N427.27 billion as of Wednesday.
“Additionally, the tight system liquidity suggests that investors may demand higher rates to compensate for the shortage in cash. This could further drive upward pressure on yields at the longer end of the curve,” the report stated.
Similarly, shorter dated instruments were met with rich investors’ appetite compared to the last auction.
The 91-day bill was oversubscribed by 28.2 percent of the N13.14 billion offered, however only the amount offered was sold.
While the 182-day bill got N12.58 billion subscriptions, the CBN sold only N9.35 billion.
Yields on the 182-day and 91-day bills remained the same as the last three auctions at 19.17 percent and 17. 75 percent respectively.
The Cardoso led Monetary Policy Committee has jacked up the interest rate by 850 basis points to 27.25 percent from 18.75 percent at the start of the year to combat rising inflation, this has led to an equal increase in the yields of treasury bills compared to last year.
The money supply (M3) in Nigeria, the total amount of money in circulation, increased by 100 percent to 107 trillion naira in August 2024 from the same period last year.
The apex bank has therefore taken contractionary measures to resolve this imbalance, one of which includes mopping up N7.3 trillion naira in the last nine months through Open Market Operations (OMO).
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