Investors bid as high as 19% per annum for Nigeria’s Treasury Bills

Investors seeking the risk-free treasury bills made offers valued at N273.4 billion even though the amount on offer was N143.9 billion. The range of bids was between 10-19 per cent as the Central Bank of Nigeria closed at a stop rate of 14.7 per cent.

The true yield for the one-year auction is as high as 17.3 per cent by our estimates as treasury bills interest is typically paid upfront. This means the true return for investing in the primary option of this Treasury bill will earn a 17.3 percent return.

The 182-day treasury bill of N2.5 billion was on offer and the subscription was N3 trillion while the 91-day bill had an offer of N3.1 trillion and subscriptions valued at N3.7 trillion were made. The central bank also allotted N2.7 billion.

Treasury bills yield has been rising since the CBN started its rate hikes in response to the high inflation rate. With the inflation rate at 21.9 per cent, the CBN has increased its benchmark monetary policy rate to 18 per cent.

Treasury Bills are considered to be one of the safest forms of investment since they are backed by the government. As the rate on Treasury Bills increases, it becomes more attractive to investors who are seeking a risk-free investment as they may choose to invest in Treasury Bills rather than other riskier investment options.

As the rate on Treasury Bills increases, the opportunity cost of investing in other options such as stocks increases. For instance, if an investor is considering investing in a stock that has a lower expected return than the Treasury Bills rate, they may choose to invest in Treasury Bills instead. This could result in a decrease in demand for investment in Nigerian stocks.

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