ABUJA — The Central Bank of Nigeria (CBN), acting on behalf of the Debt Management Office (DMO), will offer ₦900 billion worth of Nigerian Treasury Bills (NTBs) at its first auction of the fourth quarter on Wednesday, October 7.
According to the auction notice, the offering will consist of ₦100 billion in 91-day bills, ₦100 billion in 182-day bills and ₦700 billion in 364-day bills.
Settlement for the auction is scheduled for Thursday, October 8.
One-Year Bill Gets Largest Allocation
The 364-day instrument accounts for more than three-quarters of the total offer, reflecting continued investor interest in longer-dated government securities.
The heavy allocation comes despite a broad decline in Treasury-bill yields following the CBN’s 350-basis-point reduction in the Monetary Policy Rate (MPR) to 23 per cent.
The one-year bill has continued to attract significant demand as investors seek to lock in relatively attractive returns before further monetary easing potentially pushes yields lower.
September Auction Attracted ₦4.23tn
Strong demand was evident at the previous NTB auction held on September 23.
The 364-day bill attracted ₦4.09 trillion in subscriptions, representing about 97 per cent of total demand at the auction.
It eventually cleared at a 15.89 per cent stop rate, down from 16.62 per cent at the preceding auction and 17.70 per cent in July.
Overall subscriptions at the September auction reached ₦4.23 trillion against an offer of ₦600 billion.
The DMO, however, ultimately allotted ₦497.59 billion.
Investors Continue To Chase Government Securities
Analysts said strong liquidity in the financial system and expectations of further yield compression could keep demand high at Wednesday’s auction.
Adeniyi Adejumobi, Assistant Fixed-Income Fund Manager at FCMB, said the CBN’s 350-basis-point MPR reduction had triggered further repricing across the Treasury-bill market.
According to him, investors are adjusting their expectations for future interest rates following the change in monetary policy.
The development could encourage investors to increase demand for longer-tenor Treasury bills while yields remain relatively attractive.
OMO Auction Also Shows Strong Demand
Recent CBN liquidity operations have also highlighted strong appetite for government securities.
At the final September Open Market Operations (OMO) auction, investors submitted ₦6.40 trillion in bids against approximately ₦4.69 trillion in securities offered.
The high level of demand indicates that investors continue to show substantial interest in government-backed fixed-income instruments despite the declining yield environment.
DMO Exceeds Third-Quarter Target
The DMO also recorded strong demand throughout the third quarter.
Across eight NTB auctions during the period, the agency allotted approximately ₦8.14 trillion, exceeding its ₦5.8 trillion target by about 40 per cent.
The strong performance was largely driven by demand for the 364-day instrument.
The trend suggests that investors have continued to favour longer-dated Treasury bills, particularly as expectations of lower interest rates increase.
Auction To Test New Rate Environment
Wednesday’s auction is expected to provide an important indication of how quickly Treasury-bill yields are adjusting to the CBN’s new monetary-policy environment.
Market participants will closely watch the level of subscriptions for the ₦700 billion 364-day offer.
Investors will also monitor whether the stop rate on the one-year instrument falls below the 15.89 per cent recorded at the September 23 auctioncom
A further decline would signal continued repricing in the Treasury-bill market following the CBN’s reduction of its benchmark interest rate.
With strong liquidity and investor demand continuing to support government securities, the October auction is set to provide another important test of market appetite for Nigerian Treasury bills under the lower-rate environment.
