The Central Bank of Nigeria (CBN) is set to inject a substantial N700 billion into the financial market through a Treasury bill auction scheduled for Wednesday. This move comes as investors grapple with escalating spot rates across various maturities, signaling a dynamic shift in Nigeria’s fixed-income landscape.
According to a recent financial market notice, the CBN will distribute the N700 billion across standard maturities: N80 billion for 91-day bills, N120 billion for 182-day bills, and a significant N500 billion for 364-day bills. This auction follows two consecutive sales that witnessed a notable increase in spot rates, prompting market participants to closely monitor the upcoming event.
Adding to the market’s activity, a staggering N1.18 trillion worth of Nigerian Treasury Bills is slated to mature this week, potentially fueling further trading volumes. Last week’s auction saw the CBN offer N800 billion, attracting a robust demand of N902.04 billion. However, only N503.92 billion was ultimately allotted, highlighting the intense competition for these instruments.
The previous auction also revealed a sharp uptick in stop rates, with the 364-day bill reaching a peak of 19.94%, while the 91 and 182-day bills settled at 18.00% and 18.50%, respectively. This increase in yields underscores the growing demand for higher returns in the face of prevailing economic conditions.
Post-auction, unmet bids spilled into the secondary market, briefly boosting activity. However, liquidity constraints persisted, limiting trading volumes and causing average yields to stabilize around the 19% mark. Market analysts have observed an upward trend in the Nigerian Interbank Treasury Bills True Yield, as investors seek to maximize their returns. Despite this, a gradual easing of average market yields is anticipated, suggesting a potential stabilization in the coming weeks.
The CBN’s decision to adjust spot rates upwards in the last two auctions, despite declining headline inflation and relatively high-interest rates, reflects the complex interplay of economic factors. As Cowry Asset Limited noted, global inflationary pressures continue to influence central bank policies, prompting a hawkish stance in many economies.
However, analysts also point to a downward trend in Nigeria’s inflation indicators, driven by currency stability, potential market interventions, and seasonal effects. Looking ahead, Nigeria’s headline inflation is expected to maintain its downward trajectory, supported by high-base effects and a stable local currency.
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