The Central Bank of Nigeria (CBN) conducted its latest Primary Market Auction (PMA) on Wednesday, May 8th, 2024, offering one-year treasury bills with a maturity date of August 8th, 2025, at a stop rate of 20.70%.
This is the same rate offered at the April 24, 2024 auction, which had high demand for the 364-day bill.
In total, the CBN raised N274.67 billion, which is far lesser than the N362.45 billion raised in the previous auction across various maturities.
Recommended reading: CBN sells another N1.3 trillion in treasury bills at 21.5%
Auction Breakdown by Tenors
- 91-Day Treasury Bills (3-Month Tenor): In the 91-day treasury bills category, CBN offered N39.90 billion for subscription. Investor interest remained strong, attracting a total subscription of N21.24 billion, indicating solid demand for this short-term instrument. Ultimately, the CBN allotted N16.59 billion at a stop rate of 16.24%, with bid rates ranging between 15.50% and 21.50%. The successful bidders in this category will see their investments mature on August 8, 2024.
- 182-Day Treasury Bills (6-Month Tenor): The 182-day treasury bills, with a medium-term maturity, had a relatively smaller offer size of N5.43 billion. Despite the lower offer amount, the segment received considerable attention, garnering subscriptions totaling N13.07 billion. The CBN eventually allotted the entire N5.44 billion on offer, clearing at a stop rate of 17.00%. Bids in this category ranged from 16.90% to 20.00%, and the bills are set to mature on November 7, 2024.
- 364-Day Treasury Bills (One-Year Tenor): The 364-day treasury bills, which attracted the most significant interest due to their longer-term nature and higher yields, had an initial offer of N134.02 billion. Investors flocked to this tenor, leading to a staggering subscription of N879.75 billion, showcasing the strong demand for government securities in this maturity segment. To meet the high demand, the CBN allotted N252.64 billion, far exceeding the initial offer. The stop rate for these bills stood at 20.70%, with a bid range between 19.00% and 26.00%. The one-year bills will mature on May 8, 2025.
More Insights
The high subscription figures for all tenors reflect robust investor interest in government securities despite prevailing economic challenges.
- Specifically, the 364-day bills received subscriptions worth N879.75 billion against the initial offer of N134.02 billion, resulting in an oversubscription ratio of more than six times. The CBN, however, allotted N252.64 billion, exceeding the initial offer to meet investor demand.
- The 20.7% stop rate for the 364-day tenor indicates the CBN’s strategy to offer competitive rates that attract local and foreign investors. Given the ongoing inflationary pressures and global interest rate trends, this high yield provides a safe and attractive investment option.
- Investors looking to diversify their portfolios with fixed-income instruments will find these rates highly appealing.
- This NTB auction reflects the CBN’s commitment to offering competitive yields on government securities, ensuring liquidity and fostering confidence in the financial markets.
Recommended reading: CBN sells N1.64 trillion in treasury bills as higher interest rates attract investors
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