In respect to the CBN policy committee meeting in February 2024, the Central Bank of Nigeria (CBN) further increased spot interest rate on 36-day treasury bill (NTB) instrument to 21.45%
The CBN balance funding cost is expected to climb following interest rate push to 22.75%. It was analysed that the high interest rate environment would trigger rates repricing on government borrowing instrument.
The apex bank conducted a primary market auction across tenors; 91-day, 181-day, and 364-day. The 364-day bills recorded the highest rate at 21.49 per cent, in a bid to control liquidity in the Financial system.
According to the auction result, subscriptions came stronger amidst elevated yield in the fixed income market and an expectation that fresh catalysts for rates repricing surfaced after the monetary policy committee meeting last month.
The CBN allocated Treasury bills worth N1.32 trillion to fixed interest security investment, majorly institutional and other authorised dealers, following a large subscription level.
The market participant staked N1.54 trillion and CBN eventually sold N1.29 trillion for the 364 day T-bills auction. One year T-bill was priced higher at 21.49 percent in an attempt to lure foreign portfolio inflow.
The auction results revealed that the range of bid for the 364-day stood at 17.0000-27.0000 per cent, as subscription levels for the 364-day T-Bills was robust, reflecting heightened investor appetite amidst the current economic landscape.
In the money market, Nigerian interbank rates trended higher across all tenor buckets, reflecting a liquidity squeeze in the system. Interbank rate rose by 23bps to 28.81%
For the 182-day auction, the CBN offered N10.55 billion to investors and recorded N51.51 billion, but finally allotted N10.55 billion. The CBN allocated N14.42 billion in 91-day T-Bills, with a stop rate of 17.24 cent and received a subscription and total sales of N66.63 billion. It allocated N14.42 billion, the amount it offered to the investing public.
Key money market rates, including the open repo rate (OPR) and overnight lending rate (OVN), increased by 1.29% and 1.42%, to 29.50% and 30.46%, respectively, Cowry Asset Management said in a note. In the secondary market for Nigerian Treasury bills, the average yield closed at 16.56%.