CBN Raises N406.1bn From NTB Market in July Amid Attractive Yield
Nume Ekeghe
The Central Bank of Nigeria (CBN) experienced a surge in the fixed income market, raising N406.1 billion from Nigerian Treasury Bills (NTB), in July 2023, a remarkable 98.58 per cent increase from the N277.27 billion raised in June 2023.
According to the CBN “Government Securities Summary,” report, the NTB auction was oversubscribed by 37.26 per cent or N1.09 trillion, indicating significant investor interest.
To attract investors, the CBN offered attractive yields on its NTB, capitalising on a bullish sentiment despite rising inflation rates and a hike in the Monetary Policy Rate (MPR). The implementation of new government foreign exchange policies has also contributed to a renewed interest in the stock market.
The primary purpose of raising fresh capital through the NTB was twofold: to mop up excess liquidity in the system and to provide short-term bridging funds to support the federal government’s budget spending.
According to the CBN only two NTB auctions were carried out in July with the average yield on 356-day NTB increasing to 12.15 per cent during the second auction from the previous 5.94 per cent in the first auction.
According to the CBN NTB auction result, the 91-day interest rate increased to six per cent from 2.86 per cent, while 180-day auction interest rate was at eight per cent from 3.5per cent.
The CBN said it raised N141.77 billion in its first auction in July, and recorded N691.86 billion oversubscription. In the second auction, the CBN raised said it N264.33billion and N398.17billion oversubscription.
The double-digit increase in 364-day NTB, according to analysts is coming on the backdrop of hike in MPR to 18.75 per cent in July.
The Monetary Policy Committee (MPC) of the CBN had voted to increase the MPR further by 25 basis points to 18.75per cent at its July policy meeting.
Cordros Research in a report expressed that it expected the financial system liquidity profile to remain healthy in the near term, partly driven by increased FAAC inflows.
“With our expectation that the MPC is at the end of its monetary policy tightening cycle, risk appetite for mid to long-dated bonds is likely to improve. Nonetheless, we maintain our expectations that yields in the fixed-income market are still bound to rise further from current levels.
“Our prognosis is hinged on our expectation of a sustained imbalance in the supply and demand dynamics, more so that the FGN’s 2023FY borrowing needs remain high. However, we highlight that deliberate actions by the DMO to keep the borrowing costs at a moderate level and a possible maturity of CBN special bills present as downside factors, ”it stated.
