The Central Bank of Nigeria (CBN) significantly reduced interest rates on Treasury bills after a drop in the country’s inflation rate. This move has encouraged investors to pour money into naira assets.
During a midweek auction, the CBN offered N700 billion worth of Treasury bills across different maturity periods: 91 days, 182 days, and 364 days. Despite a liquidity shortage exceeding N1 trillion in the money market, investor interest remained strong, with total subscriptions exceeding N2.4 trillion.
As a result, the CBN allocated N774.13 billion worth of Treasury bills. Interest rates on these bills dropped significantly, making them more attractive to investors. The 91-day Treasury bill rate fell by 1% to 17%, while the 182-day rate declined by 0.5% to 18%. The longest maturity, the 364-day bill, saw the most significant drop, falling by 1.89% to 18.43%.
The decline in Treasury bill rates is due to inflation falling to 24.48%, bringing it below the central bank’s benchmark interest rate of 27.50%. This means investors are now seeing positive real returns on their investments in government securities.
Overall, the financial market remains dynamic as investors adjust to the latest economic policies and inflation trends.
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