The Central Bank of Nigeria reduced the stop rate on the 364-day treasury bill by 44 basis points to 17.15 per cent at Wednesday’s primary market auction, even as investors submitted N3.63 trillion in bids for the instrument.
Total subscriptions across the three maturities reached N3.79 trillion, with the one-year paper accounting for 95.9 per cent of the demand. The apex bank had offered N700 billion in total N100 billion each for the 91-day and 182-day bills and N500 billion for the 364-day bill. Overall bids exceeded the offer by more than five times.
Strong Demand for One-Year Paper
The 364-day bill was the clear focus of investor interest, attracting bids equivalent to 7.26 times the amount offered. The Central Bank allotted N638.19 billion, exceeding its N500 billion offer by N138.19 billion. Only about 17.6 per cent of the total bids submitted for the instrument were accepted.
Investors quoted yields ranging from 16.00 per cent to 19.05 per cent, but the Central Bank cleared the auction at 17.15 per cent. The depth of demand allowed the regulator to reject higher-priced bids and still secure a lower borrowing rate despite the exceptionally strong interest.
Weaker Appetite at the Short End
Demand for the shorter tenors was more subdued. The 91-day bill drew N103.32 billion in subscriptions against the N100 billion offered. The Central Bank allotted N89.10 billion at an unchanged stop rate of 16.30 per cent.
The 182-day bill attracted only N52.93 billion against N100 billion on offer. The bank allotted N35.59 billion while leaving the stop rate unchanged at 16.50 per cent.
Secondary-market yields for all three instruments stood above their respective auction stop rates: 17.45 per cent for the 91-day bill, 17.05 per cent for the 182-day bill and 17.24 per cent for the 364-day bill.
Analyst Assessment
Financial sector analyst Jimbe Asalor said the heavy concentration of bids in the one-year instrument indicated that investors were prioritising the chance to lock in relatively attractive yields for a longer period rather than repeatedly rolling over shorter-term securities.
He noted that the auction also showed the Central Bank’s ability to borrow more cheaply when demand is focused on a particular maturity. By accepting N638.19 billion on the 364-day bill at 17.15 per cent, the bank took more than its initial offer while simultaneously cutting the rate by 44 basis points. The nine-basis-point gap between the auction stop rate and the 17.24 per cent secondary-market yield suggested the one-year segment was trading close to market expectations.
Lagos-based consultant economist Chukwunonso Iheoma said that if the preference for longer-dated treasury bills continues, it could support a gradual decline in government borrowing costs and reinforce expectations of eventual interest-rate cuts.
For Nigerian businesses and consumers, lower government borrowing costs could in time translate into cheaper credit and a less restrictive monetary policy stance. That outcome, however, will depend on whether investors maintain their focus on longer-dated instruments in subsequent auctions.
