In the most recent Nigerian Treasury Bills auction, the Federal Government, acting through the Central Bank of Nigeria, raised a total of N284.26 billion. This came when its T-Bill obligations increased by 60% in just three months, reaching N10.4 trillion between December 2023 and March 2024.
The Debt Management Office’s auction result, which was cross-checked with information published on the CBN website on Thursday, indicates that there was a substantial level of investor interest in the auction. The overall subscription amount was N773.98 billion, much more than the N228.72 billion total offer.
The most recent result shows that yield-hungry investors are still in high demand and that there is a source of money to cover the government’s immediate expenses.
Recall that the government also raised N297bn from the June bond auction, which is only about 66 per cent of its target and 22 per cent less than the N380.77bn raised in May.
The bonds, being crucial instruments for the government’s debt management strategy, serve multiple purposes, including providing investors with a relatively safe investment option, assisting in managing the country’s debt profile, and facilitating efficient fund management.
Specifically, treasury bills and FGN bonds are classified as risk-free, theoretically zero risk, because the government is assumed to always make good on its debts. If not, they can print money to pay it back.
As an instrument to implement monetary policy, the CBN also control the money supply in the economy by issuing or redeeming Treasury Bills. T-Bills also provide a means for the government to raise short-term funds to finance its operations, including bridging budget deficits.
In the latest auction analysed by The PUNCH, there was an increase of 417.1 per cent in the amount offered when compared to the N44.23bn offered in the previous auction, which was held on June 13, 2024. Also, total subscriptions recorded an 89.8 per cent increase from N407.76bn while total sales rose by 414.7 per cent from N55.23bn. A further breakdown showed that the auction featured three tenors of 91-day, 182-day, and 364-day bills.
The 91-day tenor, maturing on September 25, 2024, had an offer of N29.83bn but received subscriptions worth N36.29bn, with an allotment of N28.15bn. The range of bids for this tenor was between 15.98 per cent and 24.00 per cent, with a stop rate of 16.30 per cent.
Similarly, the 182-day bills, maturing on December 25, 2024, saw an offer of N30.67bn against subscriptions of N40.58bn, and an allotment of N36.44bn. The bid range was between 17.00 per cent and 21.00 per cent, with a stop rate of 17.44 per cent.
The 364-day bills, maturing on June 25, 2025, had the highest offer at N168.21bn. It recorded an overwhelming subscription of N697.11bn and an allotment of N219.67bn. The bid range for this tenor was 16.00 per cent to 25.00 per cent, with a stop rate of 20.68 per cent.
The significant oversubscription across all tenors demonstrates strong investor confidence in Nigerian Treasury Bills as a safe investment avenue amidst prevailing economic conditions.
The high subscription rate, particularly for the 364-day bills, reflects a preference for longer-term securities, likely driven by expectations of future economic stability and favourable returns.
The range of bids and the stop rates across the different tenors suggest competitive bidding, with investors keen on securing these government securities. Meanwhile, the government’s thirst for alternative sources of financing has resulted in the highest T-Bills debts.
This surge occurred as the DMO, via the central bank, issued several T-Bills in Q1 2024 as it relies on a combination of monetary and fiscal policy to fight inflation while also providing a source of funding to meet the government’s short-term expenditure. The debt balance surged from N2.8tn in 2024 to N5.8tn in July 2023 and N10.4tn currently.
