Nigerian Treasury Bill Interest Rates Drop Again as Subscriptions More Than Double

The Central Bank of Nigeria (CBN) recorded a significant influx of applications at the latest Nigerian Treasury Bill (NTB) auction conducted on September 11, 2024, with total subscriptions reaching N563.17 billion across the three maturities.

This reflects a notable appetite for risk-free assets, even though the amount offered stood at N161.88 billion, revealing an oversubscription rate of 248% across all tenors.

However, compared to the previous auction on September 4, 2024, where N1.13 trillion was subscribed, the current auction shows a decrease of 50.14% in total subscriptions.

On the allocation side, the total amount of N161.88 billion allocated in this auction reflects a reduction of 30.59 per cent from the N233.31 billion allocated in the previous auction.

Distribution of offers

Despite this decline, the appetite for Treasury bills (T-Bills) remains robust, particularly on the 364-day maturity.

Duration of 91 days: The CBN offered N6.78 billion for the 91-day bills, but investor demand far exceeded expectations, with a subscription of N17.80 billion, representing an oversubscription of 162.51%. The CBN eventually allocated N10.84 billion, representing a 37.5% increase over the offering size. However, this amount is still lower than that allocated in the last auction.

Duration of 182 days: The 182-day Treasury Bills, offered at N4.92 billion, received a subscription of N6.16 billion, reflecting an oversubscription of 25.2 per cent. The final allotment stood at N2.52 billion, representing a decrease of 48.8 per cent from the amount offered.

Duration over 364 days: As usual, the 364-day bills attracted the highest interest, with an offering of N150.18 billion. The tenor recorded a massive subscription of N539.21 billion, almost 359% more than the offering size. The CBN allocated N148.52 billion, indicating a 1.1% decrease in the amount offered. Despite the high demand, the allocation remained close to the initial offering size.

Tariff distribution

The offer rates reflect the competitive environment across the three maturities. Investors submitted offer rates ranging from 15.00% to 21.00% for the 91-day bills, 15.55% to 19.10% for the 182-day bills and 17.00% to 24.00% for the 364-day bills. Despite the wide range of offer rates, the CBN remained selective, with stop rates decreasing across all maturities compared to previous auctions.

91 day invoices: The 91-day bill stop rate fell to 16.63%, down 0.37% from 17.00% in the previous auction.

Invoices from 182 days: Similarly, the 182-day Treasury bill stop rate fell to 17.00% from 17.50%, a decrease of 0.50%.

364 day invoices: The interest rate on 364-day bills fell by 0.35% to 18.59%, compared to 18.94% at the previous auction.

The drop in stop interest rates is indicative of the CBN’s efforts to control the overall yield curve, despite strong investor demand.

Investors remained attracted to Treasury bonds because of their relatively high real yield, particularly in light of persistent inflationary pressures. Real yields from this auction were as follows:

17.36% for the duration of 91 days

18.59% for the duration of 182 days

22.84% for the duration of 364 days

These yields, particularly for 364-day Treasury bills, offer competitive compensation for investors seeking stable income in a volatile economic environment.