The Central Bank of Nigeria (CBN) has increased interest rates on Nigerian Treasury Bills in a move to attract investors and prevent capital flight. The decision came during a primary market auction on Wednesday, as falling yields raised concerns about potential outflows of funds from the Nigerian economy.
Despite these concerns, investor demand remained high, as shown by the auction results from the Debt Management Office (DMO), which conducted the sales on behalf of the CBN. According to MarketForces Africa, the CBN offered N550 billion worth of Treasury Bills across three different tenures—91 days, 182 days, and 364 days.
Investors placed bids totaling N1.27 trillion, resulting in a bid-to-offer ratio of 2.30x. Although this was lower than previous auction levels, it still reflected strong demand for Nigerian assets, even as liquidity in the financial market remained tight.
Market trends showed that institutional investors, including Nigerian banks, pension fund managers, and asset managers, preferred long-term investments. The 364-day Treasury Bill was the most sought-after, accounting for 94% of the total bids submitted. The DMO eventually allotted N678.76 billion in Treasury Bills, exceeding the initial offer by 23%. The 364-day bills alone received 90% of the total allocation.
In terms of interest rates, the 91-day Treasury Bill remained steady at 17%. However, the CBN adjusted rates for the 182-day and 364-day bills, increasing them by 4 basis points and 57 basis points, respectively. This brought their final rates to 17.79% and 18.39%, making long-term investments even more attractive.
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