The Central Bank of Nigeria (CBN) has hiked the interest rates on Treasury Bills, a short term debt instrument to 19% per annum on Wednesday.
The yields for the 364-day bill rose to 19%, the highest in 12 years, while the 182-day and 91-day bills also rose to 18% and 12.2% respectively.
At the last auction on the 29th of January, the interest rates for these maturities were recorded at 5% for the 91-day bills, 7.15% for the 182-day bills, and 11.54% for the 364-day bills, respectively.
The 19% rate on the 364-day bills for the first time takes it above the central bank’s policy rate, which currently stands at 18.75%. It also narrows the gap on the inflation rate, which stood at nearly a three-decade high of 28.9% in December.
The CBN’s move towards a hawkish monetary policy is a bid to mop up naira liquidity, combating galloping inflation and also attract foreign investor inflows.
Nairametrics reported that a total of ₦1 trillion was put on offer, but was oversubscribed as investors staked ₦2.3 trillion. The one-year bill on offer for ₦600 billion recorded a ₦1.8 trillion subscription out of which the central bank sold ₦908.7 billion.
Details of the offer (Nairametrics)
91 days – Investors staked only N39.9 billion for the 91-day bill compared to the N200 billion offered by the apex bank. The range of interest rates bid was between 7% and 17.2%. The central banks sold the N39.9 billion staked.
182 days – Investors also undersubscribed the offer, staking just N76.8 billion out of the N200 billion offered by the central bank. The central bank allotted only N51.3 billion. The range of bids was 4% to 19.9%. The stop rate was 18% for treasury bills.
364 days – The one-year bill witnessed a three-fold oversubscription of about N1.8 trillion compared to the N600 billion that was on offer. The apex bank allotted N908.7 billion with stop rates of 19%. Investors bid between 13% and 29.9% as interest rates.
There has been an easing of currency controls and an introduction of series of reforms since last week as part of efforts to reform Nigeria’s foreign exchange market to ease dollar scarcity that has created a backlog of unmet demand estimated at US$2.2 billion by the central bank.
Nnamdi Maduakor is a Writer, Investor and Entrepreneur