Total Subscription for NTBs Hits N38.08tn in 2024 as CBN Mops up Liquidity

Kayode Tokede

 As the Central Bank of Nigeria (CBN) intensifies the mopping up of liquidity in the financial sector, the total investors’ subscription to the Nigerian Treasury Bills (NTBs) increased from N23.51trillion recorded in the 2023 financial year to N38.08 trillion in 2024, a report by the apex bank has revealed.

According to the ‘Primary Market’ data by CBN, the N38.08 trillion NTBs subscription in the year under review was on the backdrop of demand for risk-free instruments and hedge against increasing inflation rate by investors.

NTBs are typically issued by CBN to meet the government’s short-term financing needs and are considered a safe and low-risk investment.

In the period under review, the CBN offered to raise N7.6 trillion from the NTBs market and eventually settled successfully for N12.4 trillion in total.

However, in the previous year, the CBN recorded N6.66 trillion successful NTBs subscriptions as it offered N4.56 trillion to the investing public.

As gathered by THISDAY, CBN increased the interest rate during its NTBs auction in 2024 amid efforts to woo the investing public.

For instance, the 91-day NTBs auction rate in December 2024 stood at 18 per cent from seven per cent in December 2023, while a 182-day rate moved from 10 per cent in December 2023 to 18.5 per cent in December 2024.

In addition, the rate on a 364-day closed December 11, 2024, at 22.8 per cent, as against 12.24 per cent in December 2023. 

By tightening its monetary policy through higher interest rates and large NTBs auctions, the CBN aims to curb rising inflation and stabilise the foreign exchange rate, thereby fostering a more balanced economic environment. 

THISDAY gathered that investors’ demand for long maturities NTBs continued to grow as its stop rate reached 23.5 per cent as of November, the highest in 2024.

The variation in stop rates across tenors also offers insight into investor sentiment regarding short, medium, and long-term economic outlooks.

While the lower stop rate on the 182-day bill suggests anticipation of stable interest rates, the higher stop rate on the 364-day NTBs could imply a cautious stance towards potential future economic volatilities.

Investors’ diversified demand across the different maturities of NTBs reflects strategic positioning for various investment horizons and signals a healthy trading environment in the Nigerian debt market.

The CBN’s Monetary Policy Committee (MPC) had hiked the interest rate by 870 basis points to 27.50 per cent, from 18.75 per cent at the start of the year, to combat rising inflation, leading to an equal increase in the yields of Treasury bills compared to last year.

Analysts at Cordros Research in a report titled: ‘Nigeria in 2025, Reform to Recovery: Navigating the Rebound,’ stated that the domestic fixed income market remained characteristically volatile in 2024, driven by several factors.

They listed the factors to include the tight monetary policy stance by the MPC to control the soaring inflation, the repricing of instruments to attract FPIs and improve the real return profile for local investors, and the tight liquidity in the financial system, among others.

They noted that domestic borrowings in the domestic market surged this year, partly due to the federal government’s refinancing of the CBN’s Ways & Means despite a lower-than-budgeted deficit.

According to the analysts at Cordros Research, “Specifically, the budget deficit (excluding GOEs and project-tied loans) printed lower than estimated as of August (N3.04 trillion vs Pro-rated Budget: N6.77 trillion) following the improvement in total revenue and spending below budget.

“Thus, a significant portion of total borrowing was used to refinance the CBN’s Ways & Means (N7.00 trillion) following the FG’s decision to deviate from Ways & Means deficit financing.

“Consequently, the average yields on Treasury bills (NTB) and bonds increased by 19.4 per cent and 5.3 per cent, respectively, to 25.6 per cent and 19.5 per cent (12 December 2024).”

Investment Banker and Stockbroker, Mr. Tajudeen Olayinka attributed the high yield to the factor of demand and supply, stressing that the government deliberately increased NTB supply to encourage a higher stop rate at 23.5 per cent or that some institutional investors held back their bids.

According to him, “The essence is to encourage foreign inflows that could help improve dollar liquidity in the foreign exchange market and cause a moderation in Naira exchange rate until the market attains equilibrium level.

“I do not doubt that this is the most appropriate decision on the part of CBN and the government at this time. There’s a need to improve dollar liquidity that will eventually force domestic interest rates to moderate subsequently.

“The higher interest rate will likely filter into the equity market to temporarily moderate the bullish sentiments in that market as well.”