The average interest rate on treasury bills fell to 3.66 percent last week following the decision of the Central Bank of Nigeria, CBN, to reduce the stop rate on one-year treasury bills, for the second time this year, as investors’ demand exceeded the supply by 391 percent.
Financial Vanguard analysis of the Nigeria Treasury Bills, NTB, auction conducted by the CBN last week, on behalf of the Federal Government, FG, showed that the apex bank offered N98 billion worth of bills, down by 32 percent from the N129.3 billion offered in the last auction.
Investors’ demand (total subscription), also dropped slightly to N446.3 billion, from N475.6 billion in the last auction, resulting in an oversubscription of 355 percent, up from 269 percent oversubscription recorded in the last auction held in January.
Further analysis showed that while the 91-Days bills and 182-Days bills recorded under-subscriptions of 47 percent and 30 per cent respectively, the 364-Days bills recorded over-subscription of 391 percent, with a total subscription of N441.5 billion as against the N90 billion offered by the apex bank.
Taking advantage of the huge demand for the 364-Days TBs, the CBN reduced the top rate to 5.2 percent, representing 22 basis points (bpts) from 5.72 percent in the last auction. This also represents the second consecutive reduction in the one-year TB rate since the beginning of the year.
The CBN however retained the stop rate for 91-Days bills and 182-Days bills at 2.48 and 3.3 percent respectively.
Consequently, the average interest rate on the three tenors fell to 3.66 percent from 3.73 percent in the last auction in January.