Despite Liquidity Squeeze, CBN Raises N4.74trn From Treasury Bills in 2022

Kayode Tokede

Despite liquidity squeeze in the economy, the Central Bank of Nigeria (CBN) raised a total of N4.74trillion via Nigerian Treasury Bills (NTB) in 2022, representing a decline of 21.64 per cent from N6.05 trillion raised in 2021.

The CBN raised fresh capital through the primary market (NTB) to mop up excess liquidity in the system and provide short-term bridging fund to support the federal government in its budget spending.

Data accessed by THISDAY from “government securities” auction results of CBN revealed that total offered amount at the primary market was at N3.98 trillion and it witnessed N9.22 billion subscription by investors.

THISDAY checks revealed that the stop rate on the first 91-day primary market auction in 2022 was at 2.5per cent and it moved to 2.75 per cent in December 28, 2022.

However, the stop rate on 365-day primary mark let auction ended 2022 at 8.49 per cent from 5.5 per cent it commenced the year under review.  

It is worth noting that, despite the rise in the interest rate, increased inflationary pressure to 21.34per cent in 2022 still means that the NTBs printed a negative real yield of 12.85per cent.

Meanwhile, the uptrend in the 365-day NTBs interest rate is following the hawkish move by the CBN, raising the benchmark interest rate to 16.5 per cent in 2022. 

A breakdown of trading activity revealed that at the two auctions in January 2022, a total of N206.95 billion, N588.70 billion and N281.30 billion were offered, subscribed and allotted, respectively.

“The stop rate for the 91-day bill was in the range of 2.49±0.01 per cent, compared with 2.50±0.01 per cent in the preceding month, while the 182-day instrument was in the range of 3.37±0.07 per cent, compared with 3.45±0.0 per cent in December 2021.

“Of the total subscription in the review period, there was strong investor preference for the 364-day paper as it accounted for 94.7 per cent of total bids and 96.5 per cent of total allotment, ”said CBN in its economic report for January.

For February 2022, the bid and stop rates for the 91-day bill, 182-day bill, and 364-day bill trended downward.

Despite this, a higher total subscription and allotted of N1.05trillion and N472.97billion was recorded in February.

The NTB market in March show a N295.33 billion, N1,095.16 billion and N538.33 billion offered, subscribed to, and allotted compared with a total of N262.23 billion, N509.90 billion and N289.09 billion worth of NTBs were offered, subscribed to, and allotted, respectively in April.

For May 2022, the auctions conducted on behalf of the Debt Management Office (DMO), show a sums of N280.50 billion, N614.09 billion, and N311.35 billion offered, subscribed, and allotted, respectively.

In addition, the CBN NTBs for a 1-year tenor worth N158.04 billion, which was auctioned on June 27, 2022, accumulated a total subscription of N297.96 billion, representing 88.5 per cent oversubscription, albeit a 12.53 per cent real negative yield when it stop rate was at 6.07 per cent.

Further breakdown of the report for the month of June 2022 showed that the 91-day NTB recorded an under-subscription rate of 5.4 per cent, while the 182-day bill was oversubscribed at 702.12 per cent.

At the auctions in July , NTBs of 91-, 182- and 364- day tenors worth N407.55 billion, N231.80 billion and N133.68 billion were offered, subscribed and allotted, respectively and in August, NTBs of 91-, 182-, and 364- day tenors worth N446.15 billion, N395.37 billion and N342.86 billion were offered, subscribed to and allotted, respectively.

The economic report of CBN stated that, “NTBs of 91-, 182-, and 364- day tenors worth N431.16 billion, N248.90 billion, and N144.00 billion were offered, subscribed, and allotted relative in October to N515.68 billion, N867.17 billion, and N553.66 billion in September, respectively.

“The stop rates across all maturities increased to 10.5(±4.0) per cent, from 8.8(±3.3) per cent in September.”

The report added that, “A breakdown of activities shows that total subscriptions for 91-day auction was N3.77 billion, 182-day auction, N13.23 billion and 364-day auction, N231.90 billion, compared with N14.83 billion, N18.52 billion and N833.82 billion in the preceding month, respectively.

“Total allotments for the 91-,182-, and 364- day auctions were N3.28 billion, N12.63 billion and N128.09billion, compared with N11.69 billion, N14.82 billion and N527.15 billion in September, respectively. The low demand could be due largely, to low level of liquidity in the banking system.

“With respect to demand for different maturities, investors maintained their preference for longer-term securities (364-day), as it accounted for 93.2 per cent of total subscriptions and 89.0 per cent of total allotments, ”the CBN said.