CBN shuts the door on investors as liquidity overwhelms market
CBN shuts the door on investors as liquidity overwhelms market
The Central Bank of Nigeria sent a clear signal to the financial markets during its latest midweek primary market auction, opting to lower interest rates on key Treasury bills while turning away a staggering 77 percent of total investor bids. In a joint operation with the Debt Management Office, the apex bank initially offered 1.05 trillion naira worth of debt instruments to the public. However, the market responded with an overwhelming surge of liquidity, as total subscriptions reached a massive 3.063 trillion naira, driven largely by investors seeking to lock in returns on long-term government paper.
Despite this massive oversubscription, the central bank maintained a disciplined approach to allotment, issuing only 691.87 billion naira in total. This strategy meant that nearly 2.37 trillion naira in investor capital was rejected, as the bank prioritized lowering the cost of government borrowing over full participation. The breakdown of the auction results highlighted a massive concentration of interest in the 364-day bills, which drew in 2.893 trillion naira, representing about 95 percent of all bids. In response to this high demand, the apex bank slashed the stop rate for the one-year instrument to 16.63 percent, down from 16.72 percent in the previous session.
A similar trend was observed in the medium-term 182-day bills, where the interest rate was reduced to 16.62 percent from 16.65 percent, even though demand for this specific tenor remained relatively subdued compared to the long end of the curve. Meanwhile, the short-term 91-day bills saw their rates held steady at 15.90 percent, as the bank balanced easing inflation concerns with the need to maintain attractive real returns for short-term lenders. This high rejection rate and the downward adjustment of yields underscore a calculated effort by the regulator to manage excess liquidity in the banking system while aggressively pushing for lower debt service costs for the federation.
SOURCE : NEWS SCROLL
