Subsequent to an interest rate hike during its policy committee meeting in February 2024, the Central Bank of Nigeria (CBN) has raised the spot interest rate on the 36-day Treasury bills (NTB) instrument to around 21.50%.
Analysts had anticipated that rates on government borrowing instruments will repricing due to the high interest rate environment. After the interest rate increase to 22.75%, the cost of funding the CBN balance is predicted to increase.
MarketForces Africa said that the apex bank held a primary market auction spanning tenors: 91-day, 181-day, and 364-day, in an effort to regulate liquidity in the financial sector. At 21.49 percent, the 364-day bills had the highest rate.
According to the auction result, subscriptions came stronger amidst elevated yield in the fixed income market and an expectation that fresh catalysts for rates repricing surfaced after the monetary policy committee meeting last month.
Following a large subscription level, the CBN allocated Treasury bills worth N1.32 trillion to fixed interest securities investors; majorly institutional and other authorised dealers – including deposit money banks.
One year T-Bill was priced higher at 21.49 per cent in an attempt to lure foreign portfolio inflows. Market participants staked N1.54 trillion and CBN eventually sold N1.29 trillion for the 364-day T-bills auction.
The auction results revealed that the range of bid for the 364-day stood at 17.0000-27.0000 per cent, as subscription levels for the 364-day T-Bills was robust, reflecting heightened investor appetite amidst the current economic landscape.
For the 182-day auction, the CBN offered N10.55 billion to investors and recorded N51.51 billion, but finally allotted N10.55 billion. The CBN allocated N14.42 billion in 91-day T-Bills, with a stop rate of 17.24 cent and received a subscription and total sales of N66.63 billion. It allocated N14.42 billion, the amount it offered to the investing public.
In the money market, Nigerian interbank rates trended higher across all tenor buckets, reflecting a liquidity squeeze in the system. Interbank rate rose by 23bps to 28.81%.
Key money market rates, including the open repo rate (OPR) and overnight lending rate (OVN), increased by 1.29% and 1.42% to 29.50% and 30.46%, respectively, Cowry Asset Management said in a note. In the secondary market for Nigerian Treasury bills, the average yield closed at 16.56%.
