The Central Bank of Nigeria (CBN) has recorded a significant influx of demand in the latest Nigerian Treasury Bills (NTB) auction conducted on September 11, 2024, with total subscriptions reaching N563.17 billion across the three tenors.
This marks a notable appetite for risk-free assets, even as the offered amount stood at N161.88 billion, revealing an oversubscription rate of 248% across the tenors.
However, in comparison to the previous auction on September 4, 2024, where N1.13 trillion was subscribed, the current auction shows a 50.14% decrease in total subscriptions.
On the allotment side, the total amount of N161.88 billion allotted in this auction reflects a 30.59% reduction compared to the N233.31 billion allotted in the prior auction.
Breakdown of the Bids
Despite this dip, the appetite for Treasury Bills (T-Bills) remains robust, particularly in the 364-day tenor.
- 91-Day Tenor: The CBN offered N6.78 billion for the 91-day bills, but investor demand far exceeded expectations, with a subscription of N17.80 billion, marking an oversubscription of 162.51%. The CBN eventually allotted N10.84 billion, which is a 37.5% increase from the offer size. However, this was still lower than the allotment in the last auction.
- 182-Day Tenor: The 182-day bills, offered at N4.92 billion, received a subscription of N6.16 billion, reflecting an oversubscription of 25.2%. The final allotment was N2.52 billion, representing a 48.8% decrease in the amount offered.
- 364-Day Tenor: As is typical, the 364-day bills drew the most significant interest, with an offer size of N150.18 billion. The tenor saw a massive subscription of N539.21 billion, nearly 359% above the offer size. The CBN allotted N148.52 billion, indicating a 1.1% decrease in the amount offered. Despite the large demand, the allotment remained close to the initial offer size.
Breakdown of the Rates
The bid rates reflected the competitive environment for the three tenors. Investors submitted bid rates ranging between 15.00% to 21.00% for the 91-day bills, 15.55% to 19.10% for the 182-day bills, and 17.00% to 24.00% for the 364-day bills. Despite the broad range of bid rates, the CBN remained selective with stop rates declining across all tenors in comparison to previous auctions.
- 91-Day Bills: The stop rate for the 91-day bills dropped to 16.63%, down from 17.00% in the previous auction, marking a 0.37% decline.
- 182-Day Bills: Similarly, the stop rate for the 182-day bills fell to 17.00%, down from 17.50%, reflecting a 0.50% decrease.
- 364-Day Bills: The stop rate for the 364-day bills declined by 0.35% to 18.59%, compared to 18.94% in the previous auction.
The decline in stop rates is indicative of the CBN’s effort to control the overall yield curve, despite strong investor demand.
Investors remained attracted to the Treasury Bills due to their relatively high true yields, especially in light of persistent inflationary pressures. The true yields for this auction were:
- 17.36% for the 91-day tenor
- 18.59% for the 182-day tenor
- 22.84% for the 364-day tenor
These returns, particularly for the 364-day bills, offer competitive compensation for investors seeking stable income in a volatile economic environment.
