The Central Bank of Nigeria rejected a whopping N432 billion in treasury bills bid following the auction held on Tuesday 30th of October 2019. The CBN only accepted about N132.5 billion against total bids of N565.5 billion.
Last week the CBN issued a press release that restricting access to its OMO bills to foreign investors and Nigerian banks freezing out Collective Funds, Pension Funds, Insurance Companies, FinTechs and any other financial institution looking to get a slice of higher yields. The increase in bids is believed to be a result of excess cash due to the CBN’s action.
At the auction concluded today about N72.4 billion in total subscription was submitted for 91-day bills against an offer amount of N28 billion. The 182-day bills recorded N49.6 billion bids against N10.6 billion offers. The 364-day bills got the most bids at a whopping N443.5 billion in bids compared to N93.9 billion in offers. Yields for each bill were 9.4%, 10.4% and 11.5% for 92, 182 and 364 days respectively.
As expected, this decision of the CBN meant the only risk-free investment for restricted investors to put their money into is Treasury Bills. Unfortunately, Treasury Bills offering is not typically as huge as OMO bills thus the CBN could not take on all the bids.
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What next? Rejected bids will need to be plugged in somewhere as investors scramble for what to do with their money. Some analysts opine the investors will have to now invest their cash in fixed deposits and other money market funds available.