The Central Bank of Nigeria (CBN) saw significant demand during its latest Nigerian Treasury Bills (NTB) auction held on September 11, 2024, as investors flocked to the risk-free securities. Total subscriptions reached ₦563.17 billion across three tenors, more than doubling the ₦161.88 billion offered by the CBN. This oversubscription reflects an impressive 248% increase, indicating strong investor confidence in Treasury Bills.
However, despite this large demand, total subscriptions were down 50.14% compared to the previous auction held on September 4, 2024, which saw ₦1.13 trillion in bids.
Breakdown of Bids
Investor interest was especially focused on the 364-day bills, which received the highest demand.
– **91-Day Tenor**: The CBN offered ₦6.78 billion but received ₦17.80 billion in bids, a 162.51% oversubscription. Eventually, ₦10.84 billion was allotted, marking a 37.5% increase from the offer size, though this figure was still lower than the previous auction’s allotment.
– **182-Day Tenor**: With an offer of ₦4.92 billion, investors subscribed ₦6.16 billion, reflecting a 25.2% oversubscription. The CBN allotted ₦2.52 billion, a 48.8% reduction from the offer size.
– **364-Day Tenor**: The 364-day bills attracted the most interest, with ₦150.18 billion offered and ₦539.21 billion subscribed—an oversubscription of 359%. The CBN allotted ₦148.52 billion, a slight 1.1% decrease from the offer size.
Interest Rate Trends
While demand was strong, interest rates fell across all tenors compared to previous auctions. The declining stop rates reflect the CBN’s efforts to manage yields amidst persistent demand.
– **91-Day Bills**: The stop rate dropped from 17.00% to 16.63%, a 0.37% decline.
– **182-Day Bills**: The rate fell to 17.00%, down 0.50% from 17.50%.
– **364-Day Bills**: The rate decreased by 0.35%, settling at 18.59%, down from 18.94%.
These lower rates indicate the CBN’s strategy to control the yield curve while maintaining investor interest.
True Yields
Despite the drop in rates, investors were still drawn to Treasury Bills due to their competitive yields, especially in the face of ongoing inflation. The true yields for the different tenors were:
– 17.36% for the 91-day bills,
– 18.59% for the 182-day bills,
– 22.84% for the 364-day bills.
These returns offer a relatively high and stable income for investors looking to hedge against inflation in Nigeria’s volatile economic environment.
As the CBN continues to manage monetary policy through such auctions, Treasury Bills remain an attractive option for those seeking risk-free investments with strong returns.
