Liquidity: CBN to auction ₦750bn worth of treasury bills

The Central Bank of Nigeria (CBN) has announced plans to auction local Treasury bills worth ₦750 billion on Wednesday.

The auction, which features three standard tenors, comes at a time when investor interest in long-term government securities remains high.

According to the offer details, the apex bank will raise ₦100 billion through 91-day bills and ₦150 billion via 182-day bills.

The largest portion of the auction is dedicated to the 364-day tenor, with ₦500 billion offered to investors, reflecting a significant demand for longer-duration assets.

Market analysts predict that the midweek exercise will be oversubscribed.

This expectation is driven by a combination of strong investor appetite for naira-denominated assets and high levels of liquidity within the financial system.

Last week, system liquidity reached ₦3.84 trillion, bolstered by significant deposits from commercial banks at the Standing Deposit Facility.

The market also anticipates approximately ₦1.6 trillion in inflows from maturing Treasury bills, OMO bills, and bond coupons, which is expected to further enhance available cash.

Despite the high liquidity, there are mixed expectations regarding spot rates.

The CBN has recently trended toward lowering premiums on these instruments due to robust demand. While interest rates remain high at 26.5%, the surge in headline inflation has dampened real returns.

Currently, with inflation recorded at 15.38%, the real interest rate sits at 11.12%.

During the previous auction, the Central Bank maintained the rate for 91-day bills but implemented downward adjustments for the 182-day and 364-day papers.

Specifically, the rate for 182-day bills was trimmed from 16.42% to 16.19%, while the one-year paper saw its rate drop to 16.199% from 16.43%.

This upcoming auction serves as a critical tool for the CBN in managing the country’s monetary policy and domestic debt profile amidst a shifting economic landscape marked by currency fluctuations and inflationary pressures.