Business

Stop rates to rise on tightening liquidity conditions amidst CBN’s rollover of maturing T-bills

There are expectations that the Nigerian Treasury bills market will remain active as the Central Bank of Nigeria (CBN) plans to roll over maturing bills totaling N36.56 billion.

These bills include 91-day bills worth N2.78 billion, 182-day bills worth N3.02 billion and 364-day bills worth N30.76 billion.

In addition, N10 billion in Open Market Operation (OMO) maturities are expected this week, which should help maintain system liquidity, according to dealers.

However, there are anticipations that stop rates for these issuances may rise due to tightening liquidity conditions and expectations for the Central Bank to narrow the interest rate corridor, causing interest rates to increase across the board.

In another development, Nigeria’s Debt Management Office (DMO) achieved a historic milestone in August 2023 by selling Treasury Bills (T-Bills) valued at N457.20 billion.

The achievement, as reported in the FMDQ Markets Monthly Report for August, marked a significant 12.58 percent month-on-month (MoM) increase compared to July’s N406.10 billion in T-Bill sales.

The record-breaking T-Bill sales not only signify the DMO’s effectiveness in managing the nation’s debt but also underscore the growing investor confidence in Nigeria’s financial landscape.

The surge in T-Bill sales comes amidst economic uncertainties and global market fluctuations, highlighting the resilience of Nigeria’s debt market.

T-Bills, with their short-term maturities, are a crucial instrument in the Nigerian government’s debt management strategy. The increased demand for these bills reflects investor appetite for low-risk, short-term investments, especially during times of market volatility.

While the DMO’s success in T-Bill sales steals the spotlight, it is worth noting that the agency also sold Federal Government Bonds (FGN bonds) worth N230.26 billion in August 2023.

However, this figure experienced a 65.00 percent m-o-m decrease compared to the N657.84 billion sold in July 2023 for similar FGN Bond maturities, mainly due to a 63.96 percent under-subscription.

Overall, the DMO’s performance in August 2023 signals the country’s commitment to sound fiscal management and its ability to navigate challenging financial terrain with confidence.

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