According to the most recent figure from Nigeria’s Treasury bill auctions Wednesday Nigeria’s 364-day reduced from 4.02% to 3.75%.
On the obverse Stop rates moderated slightly for the 91day tenors and 182-day tenors, the 91-day bills had stop rates of 1.8% and 182-day bills went for 2.04%.
At the auction, the Debt Management Office sold N2 billion on the 91-day paper, N2 billion on the 182-day, and N10.6 billion on the 364-day bill despite huge demand from Investors.
Michael Nwakalor, Macroeconomist at CardinalStone Research, stated that investors oversubscribed Nigeria’s Treasury bills. He said;
“The T-bill rates at today’s auction rates on the short, mid tenors and long-term declined lower. With subscription almost six times the offered amount, demand for short-dated notes remains popular in the relatively illiquid market as some investors opt to stay short amid uncertainties shrouding various macroeconomic variables.”
The much disparity between the subscriptions and the offers recorded is an indication that investors are willing to earn a negative real return, compared to the higher risk in other assets such as stocks and real estate.
Basically, the CBN sells T-bills on a bi-weekly basis to investors and it is one of the safest investments available. Interests are paid upfront and the principal paid in full upon maturity.
Basically, when the government goes to the financial market to raise money, it can do it by issuing two types of debt instruments – treasury bills and government bonds.
Treasury bills are issued when the government needs money for a short period, while bonds are issued when it needs debt for more than say five years. The issuance of treasury bills is also used as a mechanism to control the circulation of funds in the economy.
Treasury bills have a face value of a certain amount, which is what they are actually worth. However, they are sold for less. For example, a bill may be worth N10,000, but you would buy it for N9,600. Every bill has a specified maturity date, which is when you receive the money back.