The Debt Management Office (DMO) raised an impressive N693.05bn through Treasury Bills (T-bills) auctions in November 2024, marking a significant 51.79 per cent month-on-month increase compared to the N456.57bn raised in October 2024.
This data was highlighted in the FMDQ Markets Monthly Report for November, obtained by NewsNGR.
This surge highlights the growing attractiveness of T-bills as the Central Bank of Nigeria (CBN) intensifies its monetary tightening to combat inflation.
According to the FMDQ Markets Monthly Report for November, the rising interest in T-bills can be linked to the CBN’s recent decision to increase the Monetary Policy Rate (MPR) by 25 basis points, from 27.25 per cent to 27.50 per cent.
This policy shift has driven up yields on government securities, making them particularly appealing to investors seeking secure and high-yield opportunities in the current economic environment.
The elevated MPR has catalyzed a surge in demand for T-bills, drawing both institutional and retail investors eager to capitalize on higher returns.
The CBN’s hawkish stance, prompted by persistent inflationary pressures, has further bolstered this trend, positioning T-bills as an attractive investment option.
The impact of the high-interest rate environment is evident across other government securities as well. The DMO recorded sales of Federal Government Bonds (FGN Bonds) worth N346.16bn in November, a 19.53 per cent month-on-month increase from October’s N289.60bn.
Notably, sovereign securities offered during FGN Bond and T-bill auctions were oversubscribed by 207.99 per cent and 92.73 per cent, respectively, reflecting strong investor appetite.
In addition to T-bills and FGN Bonds, Open Market Operation (OMO) bills also witnessed heightened activity. The CBN sold OMO bills worth N905.23bn in November, a 23.81 per cent uptick from the N731.14bn sold in October.
The secondary market also saw a significant boost, with turnover on the FMDQ Exchange hitting N59.03trn in November 2024.
This represents a 43.18 per cent month-on-month increase and a staggering 111.80 per cent year-on-year growth. Transactions in the Foreign Exchange (FX) and Money Market (MM) segments dominated, accounting for 69.59 per cent of the total market activity.
While the total value of quoted Commercial Papers rose by 153.44 per cent month-on-month to N77.50bn in November, the outstanding value of CPs declined by 7.02 per cent to N525.57bn.
This decline was primarily due to the maturity of N117.21bn worth of CPs during the period.
As inflationary pressures persist, the CBN’s tightening policies are expected to continue driving demand for fixed-income securities.
With yields on T-bills and bonds remaining attractive, investors are likely to maintain their strong interest in these instruments, solidifying their role as a critical component of the government’s financing strategy in a challenging economic landscape.
This heightened activity across the fixed-income market underscores the strategic importance of T-bills and other government securities in the CBN’s efforts to stabilize the economy while offering investors a hedge against inflation in the high-interest-rate environment.