CBN cuts T-bill rate amid N3.63tn demand

The Central Bank of Nigeria (CBN) has successfully lowered its benchmark borrowing rate for treasury bills, even as investor demand reached unprecedented levels. At the primary market auction held on Wednesday, the CBN reduced the stop rate on the 364-day treasury bill by 44 basis points to 17.15 percent, down from 17.59 percent at the previous auction.

This move occurred despite investors flooding the auction with bids totaling N3.63 trillion for the one-year instrument alone. This figure accounted for a significant 95.9 percent of the N3.79 trillion in total bids submitted across all three maturities offered by the CBN. The auction aimed to raise N700 billion, with N100 billion each for the 91-day and 182-day bills, and N500 billion for the 364-day bill.

The overwhelming demand for the 364-day bill, which received bids equivalent to 7.26 times the amount offered, allowed the CBN to reject more expensive bids and settle at the lower rate. Although the CBN ultimately allotted N638.19 billion for the 364-day bill, exceeding its offer by N138.19 billion, only about 17.6 percent of the total bids submitted were accepted.

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The concentration of bids in the one-year instrument suggests investors may be placing greater value on locking in relatively attractive yields over a longer period rather than repeatedly rolling over shorter-term securities.

In contrast, demand for shorter-tenor instruments remained subdued. The 91-day bill attracted N103.32 billion in subscriptions against a N100 billion offer, with the CBN allotting N89.10 billion at an unchanged stop rate of 16.30 percent. The 182-day bill performed even weaker, drawing only N52.93 billion against a N100 billion offer, with N35.59 billion allotted at a stop rate of 16.50 percent.

Financial sector analyst Jimbe Asalor noted that the concentration of bids in the one-year instrument suggests investors are prioritizing locking in attractive yields over longer periods rather than frequently rolling over shorter-term securities. He also highlighted the CBN's ability to borrow more cheaply when demand is focused on a specific maturity, demonstrating the regulator's influence in the market.

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The latest auction also demonstrates the CBN’s ability to borrow more cheaply when demand is concentrated around a particular maturity.