Treasury Bill: Allotment exceeds offer by N108bn as rate increases first time in 3 months.

As a result of prevailing developments in the markets, fixed-income investors seeking high-yielding securities were successful for the first time in three months as attempts by the Federal Government to raise revenue to fund budget deficit led to an increase in stop rates.

More than N142.76 billion worth of successful transactions were recorded at the Nigerian Treasury Bills (T-Bills) auction conducted on May 13, 2020, by the Central Bank of Nigeria (CBN) on behalf of the Federal Government of Nigeria (FGN) as investors bid at rates as high as 6.64 percent, 7.48 percent and 12.8 percent on the 91-day, 182-day and 364-day bills, respectively.

Subsequently, the CBN left the rates across the three tenors at 2.5 percent, 2.85 percent, and 3.84 percent respectively. While this is the first of improvement since January 29, 2020, the rates compare with 1.85 percent, 2.49 percent and 3.84 percent the apex bank cleared on the 91-day, 182-day and 364-day bills at the previous T-Bills auction.

According to Dayo Akinola, a Lagos-based financial and risk management consultant, the stop rates are a pointer to the fact that the FG is desperately looking for money to fund its budget deficit.

“They desperately need the money and can’t live in denial any longer. Don’t be surprised if they bite more than offered in the coming auctions. I suspect that this is necessary to meet budgetary exigencies and avoid debt servicing default since revenue has shrunk,” Akinola said in a tweet.

Analysis of the auction result revealed that investors jostled for the N33.84 billion the CBN sought to raise at the auction with N165.55 billion, oversubscribed by N131.71 billion.
The apex bank allotted N142.76 billion, meaning the lender raised more money than it offered by N108.92 billion.

Even though interest for the debt instruments waned when compared with the previous primary market auction, the week’s auction was oversubscribed by more than 4 times with most demand on the 182-day paper.

The CBN sold N19.78 billion worth of bills for the 91-day paper, N40.09 billion worth of bills were allotted on the N182-day paper, and bills valued at N82.89 billion were sold on the 364-day paper.

Source: Business Day

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