By Chinwendu Obienyi
The Central Bank of Nigeria (CBN) has slightly lowered the stop rate for one-year Treasury Bills (T-Bills) to 21.889 per cent from 22.1 per cent in the previous auction.
This reduction of 0.211 percentage points or 0.95 per cent was noted during the auction on August 7, 2024.
Analysis of the auction revealed that despite the rate drop, investor interest surged, with total subscriptions reaching N486.87 billion across the three tenors, up 30.17 per cent from the previous auction’s N373.95 billion.
This increase indicates a robust investor appetite for Nigerian Treasury Bills, especially the 182-day and 364-day bills.
Despite this strong interest, the total amount offered was notably lower compared to the previous month, indicating a cautious approach by the CBN.
The total amount offered in August was N216.09 billion, a decrease of 22.26 per cent from the N277.96 billion offered in July. Similarly, the total amount allotted in sales mirrored this decline, also reducing by 22.26 per cent from N277.96 billion to N216.09 billion.
This uniform decrease in both the amount offered and the amount allotted may suggest a deliberate approach by the Central Bank to scale down the issuance and distribution of treasury bills.
Past auctions reflected a preference for longer-term securities, likely driven by expectations of future economic stability and favourable returns.
However, in the latest auction, there seems to be a renewed interest in short and mid-term T-bills, which both recorded an increase.
The range of bids and the stop rates across the different tenors suggest competitive bidding, with investors keen on securing these government securities.
It will be recalled that the apex bank conducted a Retail Dutch Auction System (rDAS) sale on August 6, 2024, where $876.26 million was sold at an exchange rate of N1,495 per dollar.
This auction aimed to address FX demand and ensure price transparency. Out of $1.18 billion in bids from 32 banks, only $876.26 million from 26 banks were accepted. The remaining bids were disqualified due to late submissions or incomplete documentation.
Meanwhile, as a result of the auction, the naira on Thursday gained N10 against the dollar on the parallel market also known as the black market.
The local currency, which quoted as low as N1,620 on Wednesday, recovered to N1,610 on Thursday morning, gaining 0.62 per cent against the dollar.