The Central Bank of Nigeria has concluded its August 3rd sale of Treasury Bills borrowing about N120 billion at a whopping yield of about 22% per annum for a 364 day tenor. This is the highest since April 2002 according to records from the CBN (90 days).
The CBN also sold N80 billion at about 19.8% and another N451.7 billion at 16% per annum. In total the CBN was borrowing about N651.7 billion at an effective interest rate of about 8% over the tenor of the loans.
The current sale represents a significant development for the money market as most investors are likely to move funds to this segment due to the attractive yields. It is also likely that most commercial banks must have also participated in this sale. A 22% yield per annum is about 6% higher than the current inflation rate and it is as good as it gets.
Analysts believe the CBN is deliberately jacking up bids because it wants to attract foreign portfolio investment into the country which can help provide liquidity to a currency market that is fairly squeezed. Another reason presented is that the CBN might also be using this as a way to suck out cash from the economy thus control the amount of naira chasing the dollars.
Treasury bills are sold bi-weekly by the Central Bank of Nigeria via a an auction. Nigerians can buy treasury bills with as low as N10,000. Learn more about Treasury Bills here.