The Central Bank of Nigeria (CBN) has implemented a significant hike in Treasury Bills rates, with the 364-day bills reaching 19 percent per annum, signalling a shift towards a hawkish monetary policy stance.
This move comes as the apex bank aims to combat the depreciation of the naira and address rising inflation by absorbing excess liquidity from the economy.
At the latest auction held on January 29th, interest rates for various maturities witnessed a substantial increase compared to previous auctions. The 91-day bills rose to 12.2 percent, the 182-day bills to 18 percent, and the 364-day bills to 19 percent.
This surge in rates reflects the CBN’s determination to offer higher returns to investors in order to mitigate currency depreciation.
Despite offering N1 trillion worth of treasury bills, demand far exceeded supply, with investors staking a staggering N2.3 trillion. Notably, the one-year bill attracted massive subscriptions, with N1.8 trillion bid for the N600 billion on offer, indicating investor appetite for higher returns in line with market expectations.
During the auction, investors bid within a wide range of interest rates, with some offering as high as 29.9 percent slightly above the inflation rate. Analysts foresee further rate increases in the coming weeks as the CBN intensifies efforts to stabilise the exchange rate.
