The Central Bank of Nigeria announced that it had sold about N99 billion in Treasury Bills last week at an interest rate of about 18.3 %pa for a one year treasury bill.
The CBN has been selling Treasury Bills at interest rates above 18% for one year dated bills since August 2016. This coincides with the CBN’s decision to sell raise monetary policy rates to 14% back in July, its highest to date.
At treasury bills rate of about 18% and above, the Government is now borrowing at its second highest rates since 2001 when yields soared to as high as 21% per annum. One Year TB Yields were 18.5% at its auction in August 3, the highest recorded this year so far.
Data also reveals that rates have more than doubled from the sub 8% yields its debts attracted towards the end of December 2015, when the MPR was reduced to 11%. However, with inflation rate above 17.8% and the government desperate to continue to attract credit, yields remain stubbornly high at over 18% and could remain this high till the end of the year.
Higher interest rates work both ways for Nigerians. For borrowers, it means lending rates will likely remain above 24% for a pretty long time as Commercial Banks will be reluctant to lend at rates low than the MPR.
On a flip side, Nigerians with loose cash deposits and looking for safe investment outlets can invest in Treasury Bills are record high rates. A simple N1 million TB investments invested for a year is now worth over N180k.
There is currently no risk free interest yielding debt that can currently beat this return in Nigeria.