Interest Rate on Nigerian Treasury Bill Slides at CBN Auction
The Central Bank of Nigeria (CBN) has further reduced interest rate on Treasury bills sold to investors at the primary market auction conducted midweek. The apex bank received higher bids for its primary market auction amidst tight liquidity in the financial system.
At the auction, the CBN offered N142.56 billion across standard maturities. In its market update, CardinalStone Securities Limited said total subscription level or remand came strong, at about N757.85 billion, resulting in a bid-to-offer ratio of 5.32x.
A total of N362.45 billion in Treasury bills were distributed to authorized dealers who took part in the auction, according to the auction results, yielding a bid-to-cover ratio of 2.09x. Like its recent past auction, the apex bank was able to reduce spot rate on the longer tenor while rates on short and mid end of the curve were retained.
The stop rate on the 91-day and 182-day treasury bills instruments stayed flat at 16.24% and 17.00%, respectively. Meanwhile, the 364-day Treasury bills instrument fell 42 basis points to settle at 20.70% compared to the previous auction results.
Following interest rate hikes, the market expects spot rates on Nigerian Treasury bills to be adjusted to compensate for accelerating inflation that hit a 30-year high of 33.20% in March. However, some Broadstreet analysts have different views. Traders think rates have peaked at the current inflation level as investor risk in government instruments is minimal.
The gap between interest (24.75%) and inflation (33.20%), however, widened to about 8.50% after the monetary policy authority shifted the benchmark interest rate by 600 basis points, or 6% in 2024, to 24.75% in an economy seeking inclusive growth.
In the money market, interbank rates diverged, according to CardinalStone Securities Limited. The open repo rate (OPR) declined by 61bps to close at 29.35%. The overnight lending rate increased by 58 basis points to settle at 31.33% due to the low level of liquidity.
#Interest Rate on Nigerian Treasury Bills Slides at CBN Auction #Sell Pressure: FBN Holdings Loses Nearly Half of Its Market Value
