The Central Bank of Nigeria (CBN) turned down a significant portion of investor bids at last week’s Treasury bill auction, rejecting N1.6 trillion worth of subscriptions.
What Happened at the Auction?
Out of the N2.41 trillion in investor bids, the CBN only allocated N774 billion, reducing interest rates in the process.
Experts suggest this decision indicates that the CBN is lowering interest rates in response to declining inflation. The demand for long-term Treasury bills was significantly high, with investors staking N2.3 trillion on the 364-day bill, which was more than four times the available offer.
Breakdown of Treasury Bill Allotments
The CBN’s final allocations were as follows:
- 91-day bills: N34.77 billion
- 182-day bills: N34.98 billion
- 364-day bills: N704.38 billion
Interest Rates Adjusted Downwards
The stop rates for Treasury bills were cut as follows:
- 91-day bills: Reduced by 100 basis points to 17.00%
- 182-day bills: Dropped to 18.00% from 18.50%
- 364-day bills: Fell to 18.43% from 20.32%
Market Implications
The lower rates suggest that the CBN is responding to shifting economic conditions, possibly to make borrowing cheaper and stimulate investment. However, investors seeking higher returns may begin to explore alternative investment options.
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