CBN Auctions N2.89trn NTBs in 7 Months, Records 39.47% Oversubscription

Nume Ekeghe 

In a bid to help the federal government finance the 2022 budget deficit, the Central Bank of Nigeria (CBN) has auctioned the sum of N2.98trillion through Nigerian Treasury Bills (NTBs) auction in seven months of 2022, compared to N2.28 trillion auctioned in seven months of 2021. 

The CBN, who offered to auction N2.05trillion 91-Day, 81-Day, and 364-Day tenor NTBs, according to its “government securities” in the period under review, eventually raised N2.98 trillion as investors’ demand for its long-term NTBs spike over lucrative yield. 

Specifically, the 364-Day tenor NTBs recorded a total subscription of N4.86trillion as against the N1.9trillion total offer by the CBN, which gave the room for a final allotment of N2.71trillion in seven months of 2022. 

It implies that investors oversubscribed the 364-Day by 93.6 per cent in the period under review. 

A further breakdown revealed that investors auctioned 91-Day NTBs with a total offer of N59.06billion of which N66.03billion was the final allotment after recording N121.89billion oversubscription, while the 180-Day NTBs that comes with N87.09billion total amount offered against N112.32billion that was eventually offered by CBN when it recorded N211.16billion oversubscription in the period under review. 

However, THISDAY gathered that investors in 48 auctions NTBs auctions by CBN this year witnessed a total subscription of N5.19trillion, a 39.47 per cent oversubscription when compared to N2.05trillion it offered to raise in seven months.

As the interest rate on 91-Day NTB opened this year at 2.5 per cent as of January 12, 2022 to 2.8 per cent as of July 27,2022, interest rate on 364-Day NTBs rose to 7 per cent as of July 27, 2022 from 5.5 per cent as of January 12, 2022. 

It is worth noting that, despite the rise in the interest rate, increased inflationary pressure to 18.6 per cent in June 2022 still means that the NTBs printed a negative real yield of 11.6 per cent.

The move was geared towards curbing the rising rate of inflation in the country as prices of goods and services hit record highs following galloping global inflationary numbers.

Meanwhile, the uptrend in the 364-Day NTBs interest rate is following the aggressive move by the CBN, raising the benchmark interest rate to 14 per cent, the second hike in 2022.

For example, the NTBs auction by CBN for a 364-Day tenor, which sought to raise N258.5 billion as of July 27, 2022 from investors, recorded an oversubscription of 22.7 per cent, as interest rate rose to seven per cent from 6.07 per cent reported in the previous month. 

Specifically, the 364-Day tenor TB recorded a total subscription of N317.25 billion as against the N258.53 billion offered by the CBN, which gave the room for a final allotment of N261.33 billion at a stop rate of seven per cent. 

A further breakdown of the summary showed that the 91-Day and the 182-Day NTBs recorded an under subscription of 16.1per cent and 60.3 per cent respectively. 

The 91-day NTBs recorded a total subscription of N1.86 billion as against the N2.22 billion intended debt raise, at a stop rate of 2.8per cent, while 182-Day NTBs recorded a total subscription of N1.26billion as against N1.4trillion total subscription and allotment of N1.26trillion. 

 In addition, the CBN NTBs for a 1-year tenor worth N158.04 billion, which was auctioned on June 27, 2022, accumulated a total subscription of N297.96 billion, representing 88.5 per cent oversubscription, albeit a 12.53 per cent real negative yield when it stop rate was at 6.07 per cent.

Further breakdown of the report for the month of June 2022 showed that the 91-day NTB recorded an under subscription rate of 5.4 per cent, while the 182-day bill was oversubscribed at 702.12 per cent.

Analysts at CardinalStone in a report titled, “Nigeria: 2022 mid-year outlook: same challenges, new shocks,” said over the first half of 2022, the federal government raised N4.1 trillion via bonds and NTBs. 

According to the report: “ After effecting the huge bond repayment of N605.3 billion in January and rolling over N1.6 billion NTB maturities, an estimated N2.0 trillion was available for budgetary purposes. 

“This net issuance was 53.9 per cent of the domestic borrowing target for 2022 including supplementary provision. For H2 2022, we expect the government to raise N3.9 trillion in bonds and NTBs.”

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