On January 8, 2025, the Central Bank of Nigeria (CBN), acting on behalf of the Debt Management Office (DMO), successfully raised N1.47 trillion in subscriptions for its 364-day Treasury Bills auction. This represents a 283.42% oversubscription, highlighting robust investor demand for the government’s longer-term securities.
The CBN declares its intention to issue Treasury Bills with tenors of 91, 182, and 364 days prior to the auction. The following sums are available:
- 91-day bills: N50 billion
- 182-day bills: N80 billion
- 364-day bills: N385 billion
The subscription results show the following:
- 91-day bills: N22.94 billion (stop-out rate: 18%)
- 182-day bills: N20.81 billion (stop-out rate: 18.5%)
- 364-day bills: N1.47 trillion (stop-out rate: 22.62%)
Bids for the 91-day bills range between 17% and 28%, for the 182-day bills between 18% and 20%, and for the 364-day bills between 22% and 28%. Each unit of the bills is priced at N1,000, with a minimum subscription of N5,000 and increments of N1,000 up to N50 million.
The Treasury Bills are set to mature on the following dates:
- 91-day bills: April 10, 2025
- 182-day bills: July 10, 2025
- 364-day bills: January 8, 2026
Allotment occurs on January 9, 2024, with the following allocations: N21.30 billion for the 91-day bills, N20.48 billion for the 182-day bills, and N473.20 billion for the 364-day bills.
Surge in Demand for Longer-Term Securities
Data from the CBN reveals a significant increase in demand for long-tenor Treasury Bills, particularly the 364-day bills, which see a dramatic 2,723% surge in subscriptions to N1.4 trillion. Interest in the 91-day bills also rises by 725.4%, with subscriptions reaching N22.9 billion. However, interest in the 182-day bills decreases by 77.9%, with subscriptions falling to N20.8 billion.
The heightened demand for longer-term securities comes as interest rates continue to rise.
Impact of Rising Interest Rates
The CBN’s recent monetary policy decisions contribute to the shift toward longer-term government securities. In November 2024, the CBN raises its Monetary Policy Rate by 25 basis points to 27.50% in an effort to address inflation, which stands at 33.88%. These rate hikes make Treasury Bills more attractive as they offer higher yields to investors seeking to hedge against inflation.
Key Insights on Treasury Bills
- Discount-Based Returns: Treasury Bills are sold at a discount, with investors receiving their returns upon maturity.
- Interest Rate Sensitivity: When interest rates rise, newer Treasury Bills become more appealing due to their higher yields.
- Shifting Investor Preferences: Changes in demand for Treasury Bills reflect investor reactions to fluctuating interest rate conditions.
In the face of uncertain economic conditions, Treasury Bills continue to be a popular choice for investors seeking steady returns.
