Subscriptions on one-year T-bill hit N2.53 trillion record high 

The Central Bank of Nigeria (CBN) has reported a remarkable surge in demand for Treasury Bills (T-bills) during the latest auction held on December 4, 2024.

The one-year (364-day) T-bill saw a record subscription of N2.53 trillion, highlighting a substantial increase in investor appetite for government securities.

This was particularly notable given the challenging macroeconomic environment, including high inflation and the ongoing adjustments to interest rates by the CBN.

In comparison to the previous T-bill auction on November 20, 2024, there were significant shifts in both the amount offered and the level of demand across various tenors.

The December auction offered a total of N583.25 billion, across three different T-bill tenors: 91-day, 182-day, and 364-day bills. In contrast, the November 20, 2024, auction had a much larger offer of N610.8 billion. Despite the smaller amount on offer in December, investor interest soared, especially for the longer-dated securities.

This surge in demand for Treasury Bills comes on the heels of a recent policy adjustment by the Central Bank of Nigeria. Last month, the Yemi Cardoso-led Monetary Policy Committee (MPC) raised the benchmark interest rate for the sixth time this year by 25 basis points, bringing the rate to 27.50%. This aggressive tightening, aimed at curbing persistent inflation, has resulted in a corresponding increase in T-bill yields compared to previous years.

91-Day T-bill: A shift in investor focus 

• For the 91-day T-bill, the amount offered in the December auction was N7.86 billion, which was significantly lower than the N41.89 billion offered in November. Total subscriptions for the 91-day bill in December were far lower below expectation at N2.92 billion, a substantial decrease from the previous auction’s subscription of N35.41 billion. This resulted in an allotment of N2.31 billion in December, compared to the full N35.41 billion allotted in November.

• The decrease in the total amount offered and the subscription volume can be attributed to a shift in investor focus towards longer-tenor securities, with more interest directed at the 182-day and 364-day bills. The stop rate for the 91-day T-bill remained unchanged at 18.00%, indicating a steady demand for short-term government debt despite the lower offering. The bid range for December widened slightly, between 17.85% and 20.00%, compared to 17.50% to 18.00% in the November auction, reflecting some flexibility in investor expectations.

182-Day T-bill: Steady demand amidst inflationary pressures 

• The 182-day T-bill saw a similar trend, with the total amount offered in December standing at N12.27 billion, compared to N28.46 billion in November. However, the total subscription for the 182-day bill in December was N17.35 billion, exceeding the amount offered and demonstrating healthy investor interest. This was slightly lower than the N18.88 billion subscription recorded in November, but still highlighted strong demand for medium-term instruments.

• The allotment for the 182-day T-bill was N13.25 billion in December, compared to N16.92 billion in November. The stop rate remained at 18.50% for both auctions, while the bid range shifted slightly, moving from 17.00% – 20.00% in November to 17.95% – 19.50% in December. This indicates a slight increase in investor demands for higher returns on medium-term T-bills, likely driven by the ongoing inflationary concerns in the market.

 364-Day T-bill: Record-breaking subscription 

• The most significant development in the December auction was the overwhelming demand for the 364-day (one-year) T-bill. The amount offered was N563.12 billion, but the total subscription reached a staggering N2.53 trillion, marking an increase of over 400% from the amount on offer. In November, the one-year T-bill saw total subscriptions of N1.12 trillion (from the N540.45 billion offered), which was significantly lower than the December figure.

• This dramatic increase in subscription was matched by a larger allotment of N741.15 billion in December, compared to N640.71 billion allotted in November. The stop rate for the 364-day T-bill in December was set at 22.93%, a decrease of 0.57 percentage points from the 23.50% rate in November. The bid range for this tenor was between 21.00% and 26.82% in December, compared to 22.00% and 23.50% in November, reflecting a broader range of expectations for long-term yields.

The large demand for the 364-day T-bill suggests that investors are increasingly seeking higher returns on longer-term government debt in response to persistent inflationary pressures. The sharp rise in subscriptions is also reflective of the broader shift in investor strategy, as many seek to lock in higher rates amidst the elevated risk premium associated with longer-dated securities.