Nigeria: Central Bank of Nigeria’s July 2022 Treasury Bills auction records 23% oversubscription

The Central Bank of Nigeria’s Treasury Bills auction for a 364-Day tenor, which sought to raise N258.5 billion from investors, recorded an oversubscription of 22.7%, as interest rate rose to 7% compared to 6.07% recorded in the previous month.

This is according to the summary of the Nigerian Treasury Bills (NTBs) auction conducted on 27th July 2022.

Specifically, the 364-Day tenor TB recorded a total subscription of N317.25 billion as against the N258.53 billion offer by the CBN, which gave the room for a final allotment of N261.33 billion at a stop rate of 7%.

It is worth noting that, despite the rise in the interest rate, increased inflationary pressure to 18.6% in June 2022 still means that the treasury bills printed a negative real yield of 11.6%. Meanwhile, the uptrend in the NTBs interest rate is following the hawkish move by the CBN, raising the benchmark interest rate to 14%, the second hike in the year.

The move was geared towards curbing the rising rate of inflation in the country as prices of goods and services hit record highs following galloping global inflationary numbers.

Also, the 182-day treasury bills recorded a total subscription of N1.4 billion in comparison to the N3.54 billion that the CBN intended to raise at a rate of 2.8%, representing an undersubscription of 16.1%.

What happened in June 2022

• Recall that the CBN Treasury Bills for a 1-year tenor worth N27.86 billion, which was auctioned on Wednesday, 15th of June 2022, accumulated a total subscription of N175.05 billion, representing 527% oversubscription, albeit an 11.63% real negative yield.
• The apex bank recorded a total subscription of N178 billion for the three tranches of T-bills auctioned as against the N34.8 billion intended offer. This represents a 511% subscription rate, while the final aggregate allotment was N34.7 billion.
• Further breakdown of the report for the month of June 2022 showed that the 91-day treasury bill recorded a subscription rate of 27%, while the 182-day bill was undersubscribed at 54%.

It appears that public investors are more interested in the long-term instrument with a higher interest rate compared to the short-term instrument. However, the continuous huge participation in the market demonstrates Nigerians’ sustained interest in fixed-income securities, especially considering the high volatility experienced in the variable investment securities.