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CBN crashes interest rates on Nigerian treasury bills

The Nigerian Treasury bills (NTB) yield benchmark slumped after the apex bank refinanced matured instruments at lower spot rates in a bid to reduce costs of funds, according to primary market auction results.

At the Nigerian Treasury bills auction, the Central Bank of Nigeria (CBN) offered bills worth N187.11 billion for subscription to investors who were predominantly local players.

The offer came in three categories: N1.75 billion subscription was expected from 91-day bills, N17.16 billion from 182-day bills, and N168.21 billion from 364-day bills.

Robust liquidity in the financial system drove subscription levels higher than previous auction results. In the money market, short-term benchmark rates declined further.

The overnight lending rate dropped by 140 basis points to 2.0% as inflow from the May FAAC allocation (N484.27 billion) supported the already buoyant system liquidity.

In the interbank space, activity in the OMO market was muted as there were no auctions or maturities; however, the Nigerian Interbank Offered Rate (NIBOR) fell for most tenor buckets.

Futureview analysts told investors in a note shared with MarketForces Africa specifically that interbank rates witnessed a substantial drop last week due to steady flows in liquidity level.

On weekly comparison, the open repo rate and overnight lending rate saw significant declines of 53.10% and 41.18% apiece, reaching 1.36% and 2.00% respectively.

Analysts at Cordros Capital Limited highlight that average system liquidity settled at a net long position of N874.39 billion, representing a 15.67% increase when compared with N755.96 billion in the prior week.

Consequently, the subscription level came higher, especially for the 364-day T-bills, as the total subscription settled at N753.47 billion from N286.13 billion in the previous auction.

Eventually, the CBN allotted precisely what was offered at respective stop rates of 2.87% for 91-day Treasury bills, 196 basis points below its previous spot price of 4.89%.

Also, 182-day –bills were sold at 4.37%, down 75 basis points from 5.12% at the previous auction. Meanwhile, 364-day bills settled at 6.23% from 8.24%, a reduction of 201 basis points from the previous pricing.

Amidst a dearth of alternative high-yielding assets, proceedings in the Nigerian Treasury bills secondary market turned bullish on account of healthy liquidity in the system. This triggered demand for bills across the spectrum.

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