Nigerian debt instrument now trading at average of 0.16% at Treasury auction
By Oludare Mayowa
Nigeria sold a total of N167.81 billion in short-dated Treasury bills on Wednesday on the Primary Market Auction (PMA) with the average yields on the three tenors paper stood at 0.16 percent, the lowest returns payable on a debt instrument in recent time.
Details of the debt auction published by the Debt Management Office (DMO) showed that a total of N138.03 billion of the 1-year debt was sold at 0.30 percent return compared with 0.98 percent at the last auction two weeks ago.
The debt office also sold N10 billion worth of the 6-month treasury bills at 0.15 percent at the auction against 0.50 percent at the previous auction.
Also, the debt management office sold N19.78 billion of the 3-month debt instrument at 0.03 percent, down from 0.34 percent previously.
In spite of the low yields regime prevailing at the debt market, investors were willing to buy up to N603.1 billion worth of the treasury bills at Wednesday’s auction.
For instance, investors demanded a total of N411.08 billion worth of the 1-year paper which was sold at 0.30 percent at the auction, while they demanded N92.17 billion and N99.85 billion worth of the 6-month and 3-month debt instrument respectively.
Analysts said the huge subscription at the auction was due to increasing liquidity in the money market with interbank rate on unsecured overnight placement at 1.05 percent.
The stop rate at the auction this week was below the projection by analysts of around 0.70 percent across all the three tenors of the instruments on auction.
Nigeria’s equity market sustained big gains on the back of buying in the banking, breweries and consumer goods sector of the market and fund piled their idle money into the stock market to benefit from possible capital gain arising from days of rally in the market.
Analysts said it’s an interesting time as with the rate interest rate is falling, investors may have to ‘pay’ the government to help them keep their funds in fixed assets.
Nigeria’s consumer inflation rate stood at 13.7 percent in September while the figure for October is expected to cross the 14 percent threshold, putting all money market instruments at a negative real interest rate.