Nigeria’s Debt Management Office (DMO) has rejected a significant portion of investors’ bids for higher interest rates on Treasury bills, raising ₦269.06 billion against an offer of ₦450 billion at its October 14 auction.
The auction, conducted by the Central Bank of Nigeria (CBN) on behalf of the Federal Government, attracted total subscriptions of ₦1.03 trillion, representing a 42 per cent decline from the ₦1.77 trillion recorded at the previous auction on October 7.
According to the Financial Markets Dealers Association (FMDA), the DMO maintained a cautious approach to borrowing costs by allotting less than the amount offered, despite demand exceeding the available supply.
Investors showed the strongest interest in the 364-day Treasury bill, submitting bids worth ₦982.21 billion against an offer of ₦350 billion. However, the DMO allotted only ₦220 billion, rejecting about 78 per cent of bids for the one-year instrument.
The stop rate on the 364-day bill rose by five basis points to 15.90 per cent, marking its first increase since August. Some investors had submitted bids at yields as high as 18.18 per cent, reflecting their demand for higher returns.
Demand for shorter-term instruments remained below the amounts offered. The 91-day bill attracted ₦19.91 billion in subscriptions against ₦50 billion offered, while the 182-day bill received ₦30.10 billion against the same offer amount.
The DMO allotted ₦19.52 billion on the 91-day instrument and ₦29.54 billion on the 182-day bill. Their stop rates remained unchanged at 15.50 per cent and 15.80 per cent, respectively.
The reduced allotment came as yields in the secondary market moved higher. The FMDA reported that the average Treasury bill yield increased to 17.86 per cent on October 13 from 17.64 per cent on October 7.
The benchmark 12-month yield rose by 61 basis points to 18.38 per cent, while the one-month yield climbed by 94 basis points to 17.75 per cent. The nine-month yield increased by 15 basis points to 18.23 per cent.
The association attributed the rising yields to investors seeking better returns following the repricing that followed the CBN’s monetary policy rate cut.
Meanwhile, banking system liquidity increased to ₦6.30 trillion from ₦3.71 trillion at the end of the previous week, supported largely by ₦2.41 trillion in open market operations maturities.
Despite the improved liquidity, total subscriptions fell, and the DMO declined to accommodate much of the higher yields demanded by investors.
The government also reduced the amount offered at the auction to ₦450 billion from ₦900 billion at the previous sale. The offer for the 364-day bill was cut to ₦350 billion from ₦700 billion, while the 91-day and 182-day offers were each reduced from ₦100 billion to ₦50 billion.
The auction highlights the tension between the government’s efforts to manage domestic borrowing costs and investors’ demand for stronger returns amid changing monetary conditions.
