Investors bid N384 billion worth of one-year treasury bills in the latest auction of 26th July 2023 at a rate of 12.15% per annum.
However, only N255 billion was allotted as investors continue to over-subscribe to the short-term risk-free investment.
The data was obtained from the latest auction report for Nigeria’s treasury bills sold during the week which sees the one-year bill matures on 25th July, 2024.
Rising Inflation
Nigeria’s inflation rate rose to 22.79% in June 2023, representing a 0.38% points increase from 22.41% recorded in the previous month.
On a year-on-year basis, the Headline inflation rate was 4.19% points higher compared to the rate recorded in June 2022, which was 18.60%.
This means there is growing demand for risk-free investments despite offering a negative real return of -10.64%.
Investor stakes in treasury bills buttress a wider challenge in the economy as the lack of investable assets forces them to accept negative real returns in exchange for earning zero and losing up to 22.79% in inflation on their cash.
What You Should Know
Investors also staked N6.4 billion for the 182-day bill, however, the apex bank was only able to allot N1.3 billion suggesting a 392% oversubscription. Investors accepted an interest rate or stop rate of 8% for the 182-day bill.
Ffor the 91-day bill, investors bid N7.8 billion as against the N1.7 billion offered by the central bank. The interest rate was at 6%.
The maturity date for the auction is 26th October 2023 for the 91-Day bill, 25th January 2024 for the 182-Day bill, and 25th July 2024 for the 364-Day bill.
An efficient capital market will provide allocational efficiency. This is where available investable funds are allocated according the best performing securities available in the market.
This will eradicate the challenge currently posed by investment in inefficient fixed income securities like treasury bills.