CBN incurs N1.55trn interest from T-Bills sales in H1, 2024
The Central Bank of Nigeria has incurred an estimated N1.55 trillion in interest payments for the 12 successful Treasury Bills (T-Bills) auctions conducted in the first six months of 2024.
The interest costs in 2024 were approximately 654.7 percent higher than the N205.63 billion recorded the same period of the previous year.
This is based on an analysis of the amount of T-Bills sold, the interest payments, and tenor in the period under review.
Data from the apex bank reveals that the apex bank has sold Treasury Bills worth N8.4 trillion in the first half of the year for tenors ranging from 91-days, 182-days and 364-day bills.
According to our findings, the stop rate, which is the interest rates accepted from the bids on offer, ranged from as low as 2.44 percent for some 91-day bills to as high as 21.49 percent for 364-day bills within the period under review.
The high interest cost is largely due to the central bank’s hawkish monetary policy aimed at curbing rising inflation rate. The central bank jacked up rates aggressively early in 2024 as part of its policy tools to mop up money supply from the economy.
The auction data indicates a total subscription of N28.15 trillion, with actual sales amounting to N8.48 trillion and an over-subscription of about 662.9 percent.
The CBN had planned to sell just N2.67 trillion in its long-dated Treasury Bills.
In total, the interest payment made by the central bank is N1.55 trillion, averaging 18 percent over the life of the securities under consideration.
The total subscription in 2024 saw an increase of 174.1 percent compared to N10.27 trillion recorded in the same period last year.
Also, total sales in 2024 surged by approximately 226.3 percent from N2.6 trillion in the first half of 2023.
Although there were high subscriptions and sales, the initial amount offered was N3.69 trillion in the period under review, which is 60.4 percent higher than N2.3 trillion in the same period last year.
The oversubscription indicates how much demand was available for risk free high interest yielding securities.
Based on our analysis, the apex bank has sold a total of N7.49 trillion in its 364-day tenured bills made up of around 14 sales rounds.
Interest rates have ranged from 8.39 percent as of January 10, 2024, to as high as 21 percent, costing the central bank an estimated N1.499 trillion in interest payments.
The 364-day bills contribute the most to the interest burden, with several auctions, such as those on 26th June 2024, 22nd May 2024, and 13th March 2024, yielding significant interest costs.
For instance, the 364-day bill auction on 27th March 2024 alone accounts for an interest cost of approximately N238.95 billion, with a stop rate of 21.124 percent.
While the 91-day and 182-day bills offer lower yields, they still contribute substantially to the overall interest costs amounting to N25 billion and N26.9 billion respectively.
The auction on 26th June 2024 for a 182-day bill, for example, will cost the government N3.17 billion in interest, reflecting a stop rate of 17.44 percent. In total, while the 91-Day Tenor bills will cost N25.07 billion, the 182-Day Tenor bills will cost N26.97 billion.
