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By Chinwendu Obienyi
Owing to the current market volatility, the Federal Government turned to fixed income instruments to finance short-term expenditures and this saw an overwhelming total subscription of N773.98 billion in Nigerian Treasury Bills (NTBs) at the just concluded auction.
According to the CBN, it raised about N284.26 billion from yield hungry investors in its latest NTBs and its subscription exceeds the N228.72 billion on offer, highlighting a robust demand for these securities.
As an instrument to implement monetary policy, the CBN can control the money supply in the economy by issuing or redeeming Treasury Bills (T-Bills). Also, T-Bills provide a means for the government to raise short-term funds to finance its operations, including bridging budget deficits.
In the latest auction, there was an increase of 417.1 per cent in the amount offered when compared to the N44.23 billion offered in the previous auction, which was held on June 13, 2024.
Also, total subscriptions recorded 89.8 per cent increase from N407.76 billion while total sales rose by 414.7 per cent from N55.23 billion.
The just concluded auction saw a significant subscription rate, surpassing the offer amount across all tenors, indicating robust demand from investors.
For instance, it featured three tenors: 91-day, 182-day, and 364-day bills.
The 91-day tenor, maturing on September 25, 2024, had an offer of N29.83 billion but received subscriptions worth N36.29 billion, with an allotment of N28.15 billion. The range of bids for this tenor was between 15.98 per cent and 24.00 per cent with a stop rate of 16.30 per cent.
The 182-day bills, maturing on December 25, 2024, saw an offer of N30.67 billion against subscriptions of N40.58 billion, and an allotment of N36.44 billion. The bid range was between 17.00 per cent and 21.00 per cent, with a stop rate of 17.44 per cent.
The 364-day bills, maturing on June 25, 2025, had the highest offer at N168.21 billion. It recorded an overwhelming subscription of N697.11 billion and an allotment of N219.67 billion. The bid range for this tenor was 16.00 per cent to 25.00 per cent with a stop rate of 20.68 per cent.
Reacting to the development, money market analysts attributed this to strong investor confidence and the safety of NTBs amidst the current economic conditions and a preference for longer-term securities due to expectations of future economic stability and favorable returns.
They noted that the range of bids and the stop rates across the different tenors suggest competitive bidding, with investors keen on securing these government securities.
“The stop rates indicate the yield investors are willing to accept, and the competitive rates achieved in this auction are indicative of the NTBs’ attractiveness”, they said.
It will be recalled that Nigeria has recorded a total NTB debt of N10.4 trillion in the first quarter of 2024, reflecting a 60 per cent rise in three months.
This surge occurred as the DMO, via the central bank, issued several T-Bills in Q1 2024 as it relies on a combination of monetary and fiscal policy to fight inflation while also providing a source of funding to meet the government’s short-term expenditure.
