CBN Hikes Interest Rates on Treasury Bills as Demand Softens
The Central Bank of Nigeria (CBN) hiked interest rates on Nigerian Treasury bills across standard tenors allotted to investors at the primary market auction amidst soft subscription.
The decision to increase the spot rate from the previous record came in contrast to market expectation following sustained disinflation, exchange rate stability and a benchmark interest rate cut.
A tight liquidity in the financial system restricted deposit money banks’ ability to stake huge bets, but analysts said an overwhelming subscription would have afforded the CBN to axe rates instead.
At the primary market auction, the CBN offered N650 billion worth of Nigerian Treasury bills across 91 days, 182 days and 364 days for investors’ subscription.
Reflecting investors’ current appetite, total subscription came at N750.91 billion, which is unusually below the demand level reported at the previous auction.
Still, investors exhibit a strong appetite for treasury bills with longer duration, as the total subscription for one-year paper settled at N674.25 billion.
Investment interest in Nigerian Treasury bills with one year expiration accounted for 90% of aggregate subscription at the midweek auction. The CBN offered to sell N100 billion worth of 91 days bills, but demand was tepid at N8.13 billion.
Eventually, the authority allotted N7.61 billion for 91 days at spot rate of 15.30%, representing an increase of 30 basis points. Nigerian Treasury bills with 182 days to maturity worth N100 billion was opened for subscription, but demand was significantly weak as well.
Investors staked N68.53 billion on the mid tenor. The allotment came at N67.42 billion at a spot rate of 15.50%, up by 25 basis points from the previous auction rate.
For one-year treasury bills, the CBN opened N450 billion for investors’ subscription at the auction, and demand came at N674.25 billion. The authority allotted N316.56 billion worth of 1-year bills at an interest rate of 16.14%, up by 37 basis points from 16.77% at the previous auction. Dangote Cement Hits 52-Week High, Surpasses N10 Trillion
