CBN sold seven times its initial offer of N134 billion on the one year treasury bill, on Wednesday at a sustained yield of 26.1 percent three times in a row.
Subscription rates on the 182-days tenor was also two times its offer of N5.49 billion.
Investors staked a total of N879.7 billion on the one-year bill versus the N134 billion that was offered. Nigeria eventually sold N252 billion at a yield of 26.1 percent, the same interest rate as the last auction.
The yield on the 182-day bills and 91-day bills were also maintained at 18.58 and 16.93 percent respectively.
The Monetary Policy Committee (MPC) decision to raise the Monetary Policy Rate (MPR) in February to 22.75 percent, representing a 400 basis points increase, saw the spike in yields in the same month.
The further bump to 24.75 percent in six weeks kept treasury bills yield attractive.
The yields have been the same from the last three auctions on the one year treasury bill from 26.7 percent at the March 27 auction. While the 91 and 182 days yields have been sustained for four consecutive auctions.
Analysts say that the CBN and DMO are mindful of borrowing cost to govt and that is informing the plateauing of rate despite inflation figures.
A total of N725 billion on the one-year bill subscription was submitted versus the N122 billion that was offered at the last auction.
“ the pegging of the stop rates (and by extension yield) on fixed income instruments by the CBN cum DMO in recent weeks is a strategy to ensure that the government’s cost of borrowing does not go over the board, even though inflation continued to track higher (which normally should have translated to higher yield offer),” Damilare Asimiyu, Macroeconomic Strategist, Afrinvest Consulting Ltd.
He said Nigeria’s government debt service to revenue stood above 70 percent between 2019 and 2022 and only moderated to 66.0 percent in 2023 due to the revaluation boost from FX revenue conversion in 2023 owing to Naira devaluation.
In a nutshell, the CBN and DMO are only just taking advantage of the huge demand from the market to ensure that the FG’s cost of borrowing is within a manageable level.
Less than the N39 billion offered in the 91-day bill was demanded, and N16.5 billion sold.
The CBN sold a total of N274.6 billion across all tenors, more than double the N142.45 billion it offered.
More so, system liquidity has been relatively strong in the last few months, (closing April at N1.6 trillion), hence, lifting investors’ appetite for safe-haven assets at a time when the equities market is short of positive trigger.
He said that system liquidity, the level, has been very strong. “By the end of Q2 in June, we estimate system liquidity to drop significantly, owing to plans to supply papers to the tune of N1.8tn (DMO Q2 bond schedule), with no bond maturity in the period,” she said.
