In the most recent Nigerian Treasury Bills auction, the Federal Government, acting through the Central Bank of Nigeria, raised a total of N284.26 billion.
This came when its T-Bill obligations increased by 60% in just three months, to N10.4 trillion between December 2023 and March 2024.
The Debt Management Office‘s auction result, which was cross-checked with information published on the CBN website on Thursday, indicates that there was a substantial level of investor interest in the auction. The overall subscription amount was N773.98 billion, significantly more than the N228.72 billion total offer.
The most recent result shows that yield-hungry investors are still in high demand and that there is a source of money to cover the government’s immediate expenses.
Recall that the government also raised N297 billion from the June bond sale, which is 22% less than the N380.77 billion it raised in May and only roughly 66% of its target.
In addition to offering investors a comparatively safe investment alternative, the bonds also help manage the nation’s debt profile and enable effective fund management, making them essential tools for the government’s debt management plan.
Treasury bills and FGN bonds are specifically categorised as risk-free, or potentially zero-risk, securities since it is expected that the government will always repay its debts. They can print money to cover the cost if not.
The CBN issues and redeems Treasury Bills as a tool to carry out monetary policy and regulate the amount of money in the economy.
The government can also generate short-term financing with T-Bills to finance its activities, including filling budget deficits.
Compared to the N44.23bn offered in the last sale, which took place on June 13, 2024, the sum offered in the most recent auction, which The PUNCH examined, increased by 417.1%.
Additionally, overall sales increased by 414.7% from N55.23 billion to N407.76 billion, while total subscriptions saw a gain of 89.8% from N407.76 billion.
An additional analysis revealed that there were three tenors of 91-day, 182-day, and 364-day bills in the auction.
The 91-day tenor, which matures on September 25, 2024, had an offer of N29.83 billion; however, N36.29 billion in subscriptions, with an allotment of N28.15 billion, were received. With a stop rate of 16.30 percent, the range of bids for this tenor was 15.98 percent to 24.00 percent.
Comparably, an offer of N30.67 billion was made for the 182-day bills, which mature on December 25, 2024, against subscriptions of N40.58 billion and an allotment of N36.44 billion. With a stop rate of 17.44 percent, the bid ranged from 17.00 to 21.00 percent.
At N168.21 billion, the 364-day bills with a June 25, 2025 maturity date earned the highest offer. It showed a staggering N697.11 billion subscription and N219.67 billion allotment. For this tenor, the bid range was 16.00 to 25.00 percent, with a 20.68 percent stop rate.
Given the current state of the economy, investors clearly believe that Nigerian Treasury Bills are a secure place to invest, as seen by the large oversubscription seen across all tenors.
A preference for longer-term securities is evident in the high subscription rate, especially for the 364-day bills. This preference is probably due to hopes for future economic stability and good returns.
Investors are eager to acquire these government securities, as evidenced by the variety of bids and the stop rates across the various tenors.
The government’s insatiable search for alternate funding sources has led to the biggest T-Bill indebtedness in the meantime.
It relies on a combination of monetary and fiscal policies to fight inflation while also providing a source of finance to cover the government’s short-term expenditures. This increase happened as the DMO, via the central bank, issued many T-Bills in Q1 2024.
The total debt increased from N2.8 trillion in 2024 to N5.8 trillion in July 2023 and N10.4 trillion at now.
