CBN auctions N446.15bn at higher cost in August

Central Bank of Nigeria (CBN), in the month of August has  sold a total of N446.15bn in Treasury bill auctions.

This was 9.47 per cent higher than the N407.55bn allotted in June. Specifically, for the 91-day tenor, the CBN sold a total of N3.43bn in August 2022 compared to N5.97bn sold in July 2022, a decline of 43 per cent.

For the 182-day tenor, the amount sold increased by 319 per cent to N11.52bn in August 2022 from N2.75bn in July 2022 while for the 364-day tenor, the amount sold increased by 8 per cent to N431.19bn from N398.83bn in the previous month.

The 364-day bills made up 94.21 per cent of total sales as investors continued to seek higher yield investment opportunities. Year-to-date, the CBN has sold a total of N3.34trn in Treasury bills, 34 per cent over the N2.5trn offered for sale.

As expected, the sales in August were at higher costs as stop rates increased steadily. The 91-day stop rate increased to 4 per cent at the August 24 auction from 3.5 per cent at the August 10 auction, 2.8 per cent (July 27), and 2.75 per cent (July 13). Similarly, the 182-day stop rate increased to 5 per cent as of 24 August from 4.5 per cent (August 10), 4.1 per cent(July 27), and 4 per cent (July 13) while the 364-day stop rate increased to 8.5 per cent as of August 24, 2022, from 7.45 per cent (August 10), 7.0 per cent (July 27), and 7.0 per cent (July 13).

Additionally, year-to-date, the central Bank of Nigeria has sold a total of N800bn via the Open Market Operations (OMO), 13 per cent over the N710bn offered.

However, there were no OMO auctions in the April, July, and August. Beyond, the short-term instruments, the Federal Government sold a total of N1.72trn in FGN Bonds, 9.41 per cent over the N1.58trn offered for sale. In all, the Federal Government sold a total of N5.86trn ytd, 22.58 per cent over the N4.78trn offered for sale as.

While the increase in Treasury bill yields on the back of the steady increase in inflation and hike in the Monetary Policy Rate (MPR) is expected, we however note that the Federal Government currently has limited capacity to accommodate any significant increase in cost of borrowing.

The Minister of Finance, Budget & National Planning, Zainab Ahmed, had earlier noted that debt servicing cost of N1.94trn as of April surpassed federal total revenue of N1.63trn for the same period.