The Central Bank of Nigeria’s (CBN) one-year treasury Bills rate for the month of
November jumped to 14.84% from 12% recorded in September 2022 after the apex bank raised the benchmark interest rate to 16.65%, its highest level since 2001.
The Central Bank offered to raise a total of N199.93 billion for the one-year treasury and recorded a total subscription of N345.23.
Meanwhile, only N199.93 billion was allotted by the apex bank, which is higher than the intended offer of N139.89 billion. The Central Bank, during the 288th MPC meeting, raised the monetary policy rate for the fourth consecutive meeting to its highest level in two decades.
To tame the rising inflationary pressure in the country, the CBN raised the MPR by 150 basis points to 16.5% on 22nd November 2022, Immediately triggering an uptick in the one-year treasury bills.
This hawkish stance is to fight off Nigeria’s inflation rate, which accelerated to a 17-year high of 21.09% in October 2022. It is, however, worth noting that despite the significant improvement in the t-bills rate, it produced a negative yield of 6.25%.
Highlights of the auction
* The 91-day tenor of the treasury bills recorded a stop rate of 6.5% and attracted a total subscription of N11.968 billion. The offer amount of N32.27 billion, while the allotment is 11.67 billion.
* Also, the 182-day treasury recorded a total subscription of N3.04 billion in contrast to the offer amount of N41.25 billion. This represents a subscription rate of 8%, while the stop rate stood at 8.05%.
For the record
* Interest rates for fixed-income instruments have increased since the CBN switched to a more hawkish stance on monetary policy, with increased participation in long-term debt instruments.
* Specifically, the Debt Management Office (DMO) raised a sum of N269.15 billion through its November 2022 FGB Savings bond issuance, representing a subscription rate of 152.9%, having issued at marginal rates of 14.75%, 15.2%, and 16.2% for the three tranches of issuances.
* The CBN monetary policy committee increased the benchmark interest rate further to encourage Nigerians to save and invest in the local currency rather than in foreign currency.
What this means:
Businesses and individuals will pay more to access bank credit if the monetary policy interest rate is raised further. While this could impact how quickly the economy grows, it is a necessary tool to stop the inflationary pressure from rising.
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