CBN Sells N1trn T-bills To Foreign Investors

The Central Bank of Nigeria (CBN) recently reported that it has successfully finished the sale of government securities, issuing N1.053 trillion (US$680 million) in short instruments as part of its liquidity management exercise.

The CBN stated that it had 79% of the total bids, equivalent to $530 million, and was sold to foreign investors in an offer that finished last Friday.

At the Open Market Operations auction (OMO), the CBN offered N500 billion and oversubscribed by selling it for N1.053 trillion.

It was reported that Friday's auction was the first since the CBN's Monetary Policy Committee meeting, followed by a virtual meeting with foreign portfolio investors.

Olayemi Cardoso, the present CBN governor, used the meetings to give measures to cushion inflation, stabilise the exchange rate, and bring back confidence in the banking system and economy.

In the meeting with investors, Mr Cardoso highlighted an outlook on sustaining increases in the CBN's foreign currency reserves, improvement in liquidity in the foreign exchange market, and imminent settlement of the remaining backlog of genuine Foreign Exchange transactions by the Central Bank of Nigeria.

He said,

"The CBN is committed to supporting price stability by taking the necessary measures to sustainably increase liquidity in the foreign exchange markets.  

"Our focus is on building a fully functioning market that allows smooth entry and exit for investors," he added.

Speaking with journalists in Abuja, Hakama Sidi, the Bank's acting director of the Corporate Communications Department, said the development underscored the confidence the Bank now enjoys from investors.

She stated that the management of the CBN believes that the monetary policy measures were beginning to yield positive results.

Back Story

According to Nairametrics, the auction, held on the 21st of February, has attracted substantial interest from investors, with the CBN setting stop rates as high as 19%. 

The auction was divided into three categories based on tenors: 91-day, 182-day, and 364-day bills.

The apex bank offered N11.96 trillion in 91-day bills, with a stop rate of 17.00%, which was a significant attraction for short-term investors.

The 182-day bills saw N10.21 trillion on offer at a 17.50% stop rate, while the 364-day bills had the highest rate at 19.00% on a N243.32 trillion offer allotment.

Subscription levels were robust across all tenors, reflecting heightened investor appetite amidst the current economic landscape.

The 91-day bills received a subscription of N368.03 billion, far exceeding the offer amount, which resulted in an allotment ratio of 27.7x with N331 billion allotted.

This indicates that almost 28 units were requested for every unit offered – a clear sign of the high demand for short-term government securities.

The 182-day bills had a subscription of N98.69 billion, with an allotment ratio of 6.5x, while the 364-day bills witnessed a whopping N1.77 trillion subscription, leading to an allotment ratio of 4.9x.

While N66.2 billion and N1.19 billion were allotted for the 182-day and 364-day bills respectively.

Bids ranged from 11.4400% to 21.0000% for the 91-day bills, 13.0000% to 20.3399% for the 182-day bills, and 15.0000% to 26.0000% for the 364-day bills.

These ranges show the variability of investor expectations regarding yield, with some investors willing to accept lower rates while others aimed for the higher end of the spectrum.