CBN Cuts T-Bill Rate to 17.15 Percent Despite N3.63tn Demand

August 28, () — Investors overwhelmingly favoured Nigeria’s one-year Treasury Bill at the latest primary market auction, giving the Central Bank of Nigeria (CBN) room to lower the government’s borrowing rate despite exceptionally strong demand.

At Wednesday’s auction, investors submitted N3.63tn for the 364-day Treasury Bill, representing 95.9 percent of the N3.79tn total bids received across the three maturities.

The demand came despite the CBN cutting the stop rate on the one-year instrument by 44 basis points to 17.15 percent, from 17.59 percent at the previous auction.

The CBN had offered N700bn across the 91-day, 182-day and 364-day bills, with N100bn allocated to each of the shorter maturities and N500bn to the one-year instrument.

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However, total subscriptions reached approximately N3.79tn, more than five times the amount offered, with the overwhelming majority concentrated at the longer end of the curve.

Investors favour the one-year bill

The 364-day instrument attracted bids equivalent to 7.26 times the N500bn offered, making it the clear outlier at the auction.

The CBN eventually allotted N638.19bn, exceeding the initial offer by N138.19bn. Despite the additional allotment, only about 17.6 percent of the N3.63tn bids submitted for the instrument were accepted.

Investors quoted rates ranging from 16 percent to 19.05 percent, but the CBN settled at 17.15 percent. The strong demand therefore allowed the regulator to reject bids seeking higher yields while still raising more than initially planned.

The result contrasts sharply with the shorter-dated securities.

The 91-day bill attracted N103.32bn in subscriptions against N100bn offered. The CBN allotted N89.10bn at an unchanged stop rate of 16.30 percent.

Demand for the 182-day bill was even weaker, with subscriptions of just N52.93bn against N100bn on offer. The CBN allotted N35.59bn at an unchanged stop rate of 16.50 percent.

The divergence suggests investors currently see greater value in securing a relatively attractive return for one year rather than concentrating on shorter-term instruments that would require them to reinvest sooner.

CBN gains borrowing leverage

The auction also highlights the CBN’s ability to influence borrowing costs when demand is concentrated around a particular maturity.

By cutting the 364-day stop rate to 17.15 percent while accepting N638.19bn, the regulator simultaneously reduced the cost of borrowing and raised more money than originally advertised.

Financial sector analyst Jimbe Asalor said the concentration of demand in the one-year instrument could indicate that investors value locking in current yields over a longer period more than repeatedly rolling over shorter-term securities.

He added that the auction demonstrated the CBN’s ability to borrow more cheaply when demand is concentrated around a particular maturity.

The secondary market also showed relatively close pricing, with the 364-day bill yielding 17.24 percent, just nine basis points above the auction stop rate.

If the preference for longer-dated Treasury Bills persists, it could support a gradual decline in government borrowing costs and reinforce expectations of further easing in fixed-income yields.

For now, however, the auction sends a clear signal: investors remain willing to lock in government paper for a year, even as the CBN tests how much it can lower the rate without weakening demand.