The latest treasury bills auction by the Central Bank of Nigeria reveal a 91-day bill sold for an interest rate of 0.34% one of the lowest in the history of the auction.
Treasury bills rate has fallen sharply since the central bank switched monetary policy from fighting inflation and attracting foreign portfolio inflows to boosting domestic credit.
In the last action two weeks ago treasury bills stop rates for a 91-day bill was 1%. The latest auction also reveals 182 and 364-day bills have fallen to 0.5 and 0.98% respectively. Despite the drops, subscription rates for the bills more than doubled the actual bills on offer. For example, N84.8 billion subscription as against N49.8 billion for a 91-day bill. Even more shocking was the one year bill with investors staking a whopping N694.9 billion in subscription against N93.9 billion on offer.
The current rates are the closest we have seen to 0% suggesting that investors are willing to earn next to nothing rather than take risks in a failing economy.
Nigeria’s inflation rate is 13.71% and galloping towards stagflation. Nigeria is expected to announce it is formally in a recession in the coming weeks as the National Bureau of Statistics collates its data.
Billions have poured into the stock market in recent weeks as investors search for investments with better yields.
However, there are limited stocks out there that can guzzle up the hundreds of billions of naira available for investing.