CBN drops stop rate on one-year Treasury Bills to 21.889% in latest August auction 

The Central Bank of Nigeria (CBN) has adjusted the stop rate on one-year Treasury Bills (T-Bills) to 21.889% in its latest auction held on August 7, 2024.

This is a minor reduction of 0.211%-points, or 0.95% from the previous auction’s rate of 22.1%.

However, the auction saw substantial participation, with a total subscription of N486.87 billion across three tenors.

This is an increase of 30.17% from N373.95 billion recorded in the previous auction held on July 24, 2024. This increase indicates a robust investor appetite for Nigerian Treasury Bills, especially the 182-day and 364-day bills.

Despite this strong interest, the total amount offered was notably lower compared to the previous month, indicating a cautious approach by the CBN. The total amount offered in August was N216.09 billion, a decrease of 22.26% from the N277.96 billion offered in July. Similarly, the total amount allotted in sales mirrored this decline, also reducing by 22.26% from N277.96 billion to N216.09 billion.

This uniform decrease in both the amount offered and the amount allotted may suggest a deliberate approach by the Central Bank to scale down the issuance and distribution of treasury bills.

Auction Breakdown 

91-Day Bills: The amount offered for 91-day bills in August 2024 saw a modest increase of 0.67%, rising from N16.48 billion in July to N16.59 billion. The 91-day bills saw a substantial rise in total subscriptions by 66.19%, reaching N21.83 billion in August from N13.14 billion in July.

The total sales also followed this upward trend, increasing by 57.89% to N20.75 billion from N13.14 billion. The stop rate for the 91-day bills remained stable at 18.5%, reflecting consistent investor yield expectations for short-term securities.

182-Day Bills: There was a substantial increase in the amount offered for 182-day bills in August, with a 697.65% rise from N6.44 billion in July to N51.35 billion.

The 182-day bills experienced the highest increase in total subscriptions, skyrocketing by 422.55% to N33.46 billion in August from N6.40 billion in July.

Total sales also saw a dramatic rise of 409.33%, amounting to N32.62 billion compared to N6.40 billion in the previous auction. The stop rate remained unchanged at 19.5%.  364-Day Bills: Conversely, the amount offered for 364-day bills saw a reduction of 41.93%, decreasing from N255.04 billion in July to N148.15 billion in August.

The 364-day bills, while showing a 21.79% increase in total subscription to N431.58 billion from N354.40 billion, saw a decrease in total sales by 37.04%, falling to N162.72 billion from N258.42 billion.

The stop rate for the 364-day bills slightly decreased from 22.1% to 21.889%, suggesting a minor reduction in yield but still maintaining investor demand for long-term investments.

 What you should know 

• Past auctions reflected a preference for longer-term securities, likely driven by expectations of future economic stability and favourable returns.
• However, in the latest auction, there seems to be a renewed interest in short and mid-term T-bills, which both recorded an increase.
• The range of bids and the stop rates across the different tenors suggest competitive bidding, with investors keen on securing these government securities.