CBN Borrows N202.4bn via T-Bills at Yields Below Inflation

Treasury billsTreasury bills
  • CBN Borrows N202.4bn via T-Bills at Yields Below Inflation

The Central Bank of Nigeria sold N202.44bn worth of Treasury bills at an auction on Wednesday at yields lower than the inflation rate, the CBN said on Thursday.

The amount raised was more than the N142.43bn it had initially proposed, but it increased its offer due to the volume of demand by investors, Reuters reported.

The CBN raised N140bn in the one-year Treasury bill at 18.44 per cent, shy of the 18.72 per cent inflation rate for January and compared with 18.54 per cent similar note fetched at the previous auction on February 2.

It issued N30bn of the six-month bill at 17.15 per cent, lower than 17.24 per cent at previous auction and a total of N32.44bn of three-month paper was sold at 13.69 per cent against 13.79 per cent previously.

Subscription stood at N415.05bn compared with N602.17bn at the previous auction.

The CBN issues treasury bills twice in a month to finance the budget deficit, help manage commercial lenders liquidity and curb rising inflation.

Meanwhile, the Debt Management Office has also raised N160bn in local currency bonds at its second debt auction this year at yields lower than the inflation rate.

The debt office had initially wanted to raise N110bn at the auction but increased the offer due to demand, Reuters reported.

Total demand stood at N337.03bn at Wednesday’s auction, higher than N235.05bn at its previous sale.

The country’s annual inflation climbed to high of 18.72 per cent in January, the 12th straight monthly rise. The trend was worsened by dollar shortages, which have crippled the country’s import-dependent economy and triggered its first recession in 25 years.

The Federal Government is also facing funding challenges brought on by the low price of oil.

It expects the budget deficit to widen to N2.36tn this year as it tries to spend its way of out of the recession.

More than half of the deficit will be funded through local borrowings, the government has said.

The Federal Government through the DMO issues local currency bonds every month to raise funds to support its spending plan, which also goes to help the banking system manage liquidity.

About the Author

Samed Olukoya
Samed Olukoya is the CEO/Founder of investorsking.com, a digital business media, with over 10 years' experience as a foreign exchange research analyst and trader. A graduate of University of East London, U.K. and a vivid financial markets analyst.

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