(SINL NIGERIA) The Central Bank of Nigeria (CBN) raised N1.32 trillion from primary market auctions (CBN) in November, an amount that is about 190% increase compared with a total amount mopped up in October 2024.
The results of the auctions revealed that spot rates increased as inflation and the interest rate sustained an uptrend. Inflation, which printed at 33.88% in October versus a benchmark interest rate hike to 27.50%, kept the real return gap at 6.38% at the end of November.
Local investors seeking to keep pace with changing market dynamics have consistently been betting on naira assets, a sentiment supported by elevated yields. Though some analysts believe that a high yield on a risk-free instrument is not sustainable, the market search for a strong return on investment remains unending.
At the main auction sales, Nigerian Treasury bills worth N1.1 trillion were offered to local investors in the market in November. However, the CBN received a cumulative subscription totaling N1.9 trillion, according to Afrinvest Limited.
The strong investment bets on the Nigerian Treasury bills instrument followed improved liquidity in the financial system. In November, liquidity recovered from a deficit position in October to print at N518.9 billion as inflows from primary market repayment.
This was bolstered by inflow from primary market repayment worth N1.3 trillion, OMO repayment totaling N7.3 billion, and fund access from standing lending facility worth N8.3 trillion. These inflows outpaced outflows via OMO sales worth N1.5 trillion, Treasury bills auctions, and standing deposit facility worth N3.1 trillion.
Out of N1.9 trillion total subscription for the Treasury bills, the CBN only allotted N1.3 trillion with investors preference for long-dated paper. Analysts said at both auctions, the long end of the curve saw the most interest, with a recorded bid-to-offer ratio of 1.7x.
A slew of investment firm noted that short- and mid-dated notes were less demanded with bid-to-offer ratios of 0.8x and 0.7x, respectively.
“In November, the Debt Management Office raised N1.32 trillion via the primary market auction, translating to 189% increase from the previous month’s N456.57 billion,” AIICO Capital told investors in a note. MarketForces Africa reported that the Debt Management Office (DMO) conducted Treasury bills auctions on behalf of the monetary authority, the CBN.
The auction cleared at higher stop rates of 18.0%, 18.5%, and 23.5% for the 91-day, 182-day, and 364-day bills, respectively, from 17.0%, 17.5%, and 19.9%. “We attribute the skewedness of investor interest to instruments with longer maturities to the current macroeconomic headwind, especially the unabating inflation,” Afrinvest Limited said.
