CBN borrows N115bn via Treasury bills

The Central Bank of Nigeria borrowed N114.97bn ($579.05m) through three-month to one-year Treasury bills on Wednesday at higher returns than in its previous auction, the Debt Management Office said on Thursday.

The debt office said N18.12bn of three-month paper was sold at 5.99 per cent, up from 5.74 per cent at a sale on March 3.

It raised N13.68bn of six-month debt at 8.30 per cent against 7.95 per cent, while a total of N83.17bn of one-year paper was sold at 9.55 per cent compared with 9.15 per cent previously.

Total subscription fell to N323.47bn from N409.84bn at the previous auction.

The CBN’s Monetary Policy Committee had on Tuesday raised the benchmark interest rate to 12 per cent from 11 per cent, having cut rates only four months ago by two percentage points, and lifted the Cash Reserve Ratio for Deposit Money Banks to 22.5 per cent from 20 per cent.

Yields on fixed income paper rose after the central bank rate hike. Three-month bills closed at 7.28 per cent on the secondary market on Wednesday, up from 4.92 per cent before the rate rise.

Six-month paper had traded at 8.97 per cent, up from 6.84 per cent on Tuesday, while one-year paper closed at 10.01 per cent against 7.77 per cent previously.

The CBN issues treasury bills to banks and non-financial institutions to help ease government cash flow, manage banking system liquidity and curb inflation.

Commenting on the TB issue, analysts at Afrinvest, a Nigeria-based wealth advisory firm, said, “The result of the T-bills auction which showed stop rates, rose significantly higher than prevailing market rates drove further bearish sentiment on Thursday as average T-bills rates continued its northwards movement to close at 7.7 per cent, up by 0.8 per cent week-to-date.

“We believe the interbank market has significantly adjusted for the MPC rate hike and barring any unexpected OMO mop-up from the system, we expect rates to continue to stay at current levels at market close next week. However, we expect rates to fluctuate to liquidity dynamics during the week as deposit money banks provision and get refunded for FX intervention.”