The Central Bank of Nigeria has disclosed that it sold about N204.9 billion in treasury bills following its auction held on Wednesday July 19, 2017.
The government sold one year treasury bills at 23% and 182 days at 19% true yield respectively. The Central Bank of Nigeria reported that inflation rate for June 2017 was 16.1% suggesting that investors were hungry for yields that beat the inflation rate.
The CBN said it sold N145.9 billion in 364 days (one year) treasury bills at a yield of 22.79% and N26.6 billion at a yield of 19%. It also sold N32.4 billion in treasury bills at a yield of 13.8%.
Actual rates were 13.4%, 17.3% and 18.5% respectively. True yields are used in treasury bills calculations to reflect the fact that interest rates are actually paid upfront unlike other traditional forms of fixed income investing where interest is paid in arrears.
Likely implication
Treasury bills yield have been sky-high since this year following CBN’s policy of mopping up liquidity to stabilize the Naira and attract foreign investors. The implication is that local business in Nigeria are being crowded out and even when they can borrow, have to pay interest rates as high as 30% in some instances to finance working capital.
The CBN has sold over N3 trillion in treasury bills in 2017 alone, one of the highest figures at the time of the year and when compared to prior years.
What is treasury bills
Treasury Bills are short-dated securities, typically for a period of one year, sold by the government to the public to finance government working capital requirement. They are backed by the full faith and credit of the Federal Government and considered one of the safest investment securities out there.
Here are details of treasury bills as published by the CBN
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