CBN raises 364-Day T-Bill rate to 17.59% despite N4.4tn demand

The Central Bank of Nigeria (CBN) has raised the stop rate on its benchmark 364-day Treasury Bill to 17.59%, defying expectations that overwhelming investor demand would push borrowing costs lower.

At Wednesday’s auction, investors submitted a combined N4.4 trillion in bids across the three tenors offered, compared with N700 billion advertised by the apex bank, according to auction results.

The sharpest movement was recorded on the 364-day bill, where subscriptions surged to N4.19 trillion, more than eight times the N500 billion offered. Despite the massive demand, the CBN increased the stop rate by 24 basis points to 17.59%, from 17.35% at the July 29 auction.

The development marks a reversal of the easing seen at the previous auction, when the CBN cut the one-year stop rate by 31 basis points despite subscriptions reaching almost seven times the amount on offer.

The apex bank allotted N1.26 trillion on the 364-day instrument, exceeding the advertised amount by N760 billion.

The 182-day bill attracted N63.97 billion in subscriptions against N100 billion offered, with N47.48 billion allotted. Its stop rate remained unchanged at 16.50%.

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Similarly, investors submitted N162.21 billion for the 91-day bill, against N100 billion offered, while N148.57 billion was allotted at an unchanged stop rate of 16.30%.

The bills mature on November 12, 2026, February 11, 2027 and August 12, 2027 for the 91-day, 182-day and 364-day instruments respectively.

The auction outcome suggests that the CBN is not yet prepared to significantly reduce short-term borrowing costs despite abundant liquidity in the banking system and exceptionally strong demand for government securities.

The scale of demand for the one-year bill would ordinarily provide room for the apex bank to clear bids at a lower or unchanged rate.