Investing Opportunity: Nigeria’s Treasury Bills Yield Is Now At Its Highest in 15 years

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The Central Bank of Nigeria announced that it had sold about N99 billion in Treasury Bills last week at an interest rate of about 18.3 %pa for a one year treasury bill.

The CBN has been selling Treasury Bills at interest rates above 18% for one year dated bills since August 2016. This coincides with the CBN’s decision to sell raise monetary policy rates to 14%  back in July, its highest to date.

At treasury bills rate of about 18% and above, the Government is now borrowing at its second highest rates since 2001 when yields soared to as high as 21% per annum. One Year TB Yields were 18.5% at its auction in August 3, the highest recorded this year so far.

Data also reveals that rates have more than doubled from the sub 8% yields its debts attracted towards the end of December 2015, when the MPR was reduced to 11%. However, with inflation rate above 17.8% and the government desperate to continue to attract credit, yields remain stubbornly high at over 18% and could remain this high till the end of the year.

Implication

Higher interest rates work both ways for Nigerians. For borrowers, it means lending rates will likely remain above 24% for a pretty long time as Commercial Banks will be reluctant to lend at rates low than the MPR.

On a flip side, Nigerians with loose cash deposits and looking for safe investment outlets can invest in Treasury Bills are record high rates. A simple N1 million TB investments invested for a year is now worth over N180k.

There is currently no risk free interest yielding debt that can currently beat this return in Nigeria.