The monetary authority, the Central Bank of Nigeria (CBN), increased the volume of domestic Treasury bills (NTB) sold at primary market auctions throughout March by over 95%, as it escalated its efforts to absorb excess liquidity from the financial system.
The CBN successfully raised in excess of N2.8 trillion during the recently concluded month, thereby exerting pressure on liquidity conditions within the money market, as banks and other institutional investors intensified their investments in government debt instruments.
In the secondary market, trading activities commenced cautiously, characterized by mixed sentiments, as market participants realigned their portfolio holdings in anticipation of the auction. The Treasury Bill market initiated trading with subdued demand and a cautious disposition among buyers prior to the midweek auction. Subsequently, on Thursday, a post-auction bearish sentiment dominated transactions in the secondary market, with mid-dated securities experiencing the most substantial impact.
Notably, the 8-January maturity exhibited the largest yield reduction (-10 bps), while the 4-September bill recorded the most significant yield expansion (+102 bps). Selling activity was concentrated at the longer end of the yield curve, particularly the newly issued one-year bill, while the 18-September NTB attracted limited investor interest.
Across the various market segments, the average yield increased by 15 bps and 168 bps, respectively, reaching 19.4% in the NTB segment and 24.2% in the OMO segment. In March, the CBN, through the primary market, raised N2.82 trillion from Nigerian Treasury bills, representing a 95.42% surge compared to the N1.44 trillion raised in February.
Acting on behalf of the monetary authority, the Debt Management Office (DMO) sold N808.73 billion worth of Nigerian Treasury bills across standard maturity periods. The allocation to investors surpassed the N700 billion offering at the auction by 16%, reflecting sustained robust demand for naira-denominated assets.
The offered amount was divided as follows: N80.00 billion for 91-day bills, N120.00 billion for 182-day bills, and N500.00 billion for 364-day bills. Auction results indicated a total subscription level of N1.43 trillion, exceeding the N902.04 billion demand observed at the preceding auction.
Reflecting investor preference for long-dated assets, demand for the 364-day paper accounted for 92% of the total allocation. The auction result translated to a bid-to-offer ratio of 2.0x, in contrast to the 1.1x ratio recorded at the previous auction.
The auction concluded with the DMO allocating N808.73 billion, comprising N38.65 billion for 91-day bills, N24.27 billion for 182-day bills, and N745.80 billion for 364-day bills. The stop rates for 91-day and 182-day papers remained unchanged at 18.00% and 18.50%, respectively. However, the spot rate for 364-day bills decreased to 19.63%, down from 19.94%.
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