The latest auction of Nigerian Treasury Bills (NTBs), conducted by the Central Bank of Nigeria (CBN) on September 4, 2024, showed the robust demand for government-backed securities in an economy facing ongoing macroeconomic challenges.
The auction attracted an overwhelming response from investors, with total subscriptions reaching over N1 trillion, a clear indication of the market’s hunger for stable and relatively risk-free returns.
The CBN offered a total of N233.31 billion across three tenors—91-day, 182-day, and 364-day bills. Despite this modest offering, investor interest soared, with total subscriptions hitting N1.13 trillion, representing an oversubscription rate of 384.17%. This figure is 9.96% higher than the N1.03 trillion in total subscriptions from the previous auction on August 21, 2024.
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The high subscription levels reflect investors’ preference for the safety of government securities amidst an environment characterized by inflationary pressures and economic uncertainties. However, despite the strong demand, the CBN remained cautious in its allotment, sticking to its initial offering of N233.31 billion. This approach marked a 19.81% decrease in allotment from the N291.03 billion allotted in the previous auction, indicating a strategic move by the CBN to control the yield curve and manage liquidity effectively.
Detailed Breakdown of Auction Results
91-Day Bills
Offer Size: N19.6 billion
- Total Subscriptions: N41.7 billion
- Allotment: N7.86 billion
While the 91-day bills were oversubscribed by more than double, showcasing significant investor interest, the CBN’s selective allotment resulted in only N7.86 billion being issued, far below the subscription total, suggesting a conservative approach to liquidity management.
182-Day Bills
- Offer Size: N10.55 billion
- Total Subscriptions: N17.97 billion
- Allotment: N1.99 billion
For the 182-day tenor, while subscriptions were also strong, the CBN allotted just N1.99 billion out of the nearly N18 billion in bids, reflecting a cautious stance in a market keen on securing medium-term returns.
364-Day Bills
- Offer Size: N203.15 billion
- Total Subscriptions: N1.07 trillion
- Allotment: N223.47 billion
The 364-day bills were the star of the auction, drawing a staggering N1.07 trillion in subscriptions. Despite this overwhelming demand, the CBN allotted N223.47 billion, the highest of all tenors but still a fraction of the total bids. This underscores the attractiveness of longer-term securities in a high-inflation environment.
Bid Rates and Stop Rates: A Market of Mixed Sentiments
The auction saw a wide range of bid rates across all tenors, reflecting mixed sentiments among investors about the future direction of yields and the broader economy.
91-Day Bills: Bid rates ranged from 16.30% to 20.00%, with the stop rate settling at 17.00%, a decline from the 18.20% recorded in the previous auction.
182-Day Bills: Bid rates varied between 17.50% and 20.50%, with the stop rate closing at 17.50%, down from 19.20% in the last auction.
364-Day Bills: Bid rates spanned from 27.00% to 30.00%, reflecting expectations for higher returns amid persistent inflation. The stop rate for these bills dropped to 18.94%, from 20.90% previously.
Despite the decline in stop rates across all tenors, the yields offered remained attractive, particularly for the 364-day bills, which provided a return of 23.3654%. The 91-day and 182-day bills also offered competitive returns of 17.7675% and 19.1881%, respectively, making them appealing options for yield-seeking investors.
As the CBN prepares to re-issue N2.2 trillion worth of maturing NTBs in the fourth quarter of 2024, the auction results from September provide key insights into investor behavior and market dynamics. The re-issuance program, part of the government’s broader efforts to manage liquidity and sustain economic stability, is expected to record another oversubscription.
In an economy where inflation remains a dominant concern and monetary policy is tightening, the continued strong demand for NTBs suggests that government securities will remain a cornerstone of investor portfolios. However, the CBN’s careful management of issuance and allotment will be crucial in navigating the balance between providing attractive returns and maintaining economic stability.