The Central Bank of Nigeria (CBN) has increased interest rates on Nigerian Treasury Bills (NTBs) across all standard maturity periods. This move comes as overall demand for these government securities has weakened.
At a recent auction held on Wednesday, the CBN adjusted the rates on short-term (91-day), medium-term (182-day), and long-term (364-day) Treasury Bills. This decision was influenced by a sharp drop in the number of bids submitted by investors compared to the previous auction.
During the auction, the government offered ₦800 billion worth of Treasury Bills to banks, asset managers, and other investors. However, total bids received amounted to ₦992.04 billion, reflecting a lower bid-to-cover ratio of 1.13x, compared to 2.30x in the last auction. Analysts attribute this lower demand to a liquidity crunch in the banking sector, with a reported deficit of about ₦1.7 trillion.
Despite the overall decline in demand, investors showed a strong preference for one-year Treasury Bills (364-day), which accounted for 92% of total bids. However, the CBN allotted only ₦503.92 billion, which was 37% less than the amount offered.
As a result of these market conditions, the CBN increased interest rates as follows:
- 91-day Treasury Bills: Interest rate increased by 100 basis points to 18%
- 182-day Treasury Bills: Interest rate increased by 71 basis points to 18.50%
- 364-day Treasury Bills: Interest rate increased by 155 basis points to 19.94%
These adjustments reflect the CBN’s strategy to attract more investors amid tightening liquidity in the financial system.
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