More money for investors as Nigeria’s T-bills yield reaches highest record

• On Wednesday, July 24th, Nigerian Treasury bills with a record-high yield were put up for auction
• This occurred a day after the CBN interest rates once more in an effort to combat inflation
• According to analysts, rates on T-Bills and OMOs could rise during the next few weeks

Legit.ng journalist Zainab Iwayemi has over 3-year-experience covering the Economy, Technology, and Capital Market.

A day after the central bank increased interest rates once more to combat inflation and defend the value of the country's currency, Nigerian Treasury bills were auctioned off on Wednesday at a record-high yield.

The central bank hiked its benchmark interest rate by 50 basis points to 26.75% on Tuesday. Photo Credit: CBN
Source: Getty Images

Treasury Bills, also known as T-Bills, are government-backed, short-term securities issued by the CBN. According to Cowrywise, they are issued when the government needs to borrow funds for a period of time.

According to Bloomberg data, the Central Bank of Nigeria auctioned 258.4 billion naira ($163 million) worth of one-year bills at the highest yield ever—22.1%. 1.37 times the value of the securities up for bid came from investors.

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In addition to promising to control price pressure, which is at a 28-year high, the central bank hiked its benchmark interest rate by 50 basis points to 26.75% on Tuesday.

Additionally, it increased the width of its "asymmetric corridor," bringing the cost of borrowing for lenders to 500 basis points above the policy rate and lowering the return on their deposits to 100 basis points. Before, it was plus or minus 300 basis points and 100 basis points.

According to analysts at BancTrust & Co., the adjustment of the asymmetric corridor is essentially a tighter posture intended to further restrain liquidity in the banking sector.

In reference to open market operations, they stated it implies that rates on OMO and T-Bills may trend higher throughout the upcoming weeks.

Additionally, at a rate of 19.5%, the central bank sold 6.4 billion naira of 182-day bills and 13.1 billion naira of 91-day bills. These rates were higher than 17.44% and 16.3%, respectively.

Since March 2022, the central bank has hiked interest rates twelve times, totaling 15.25% percentage points. To strengthen the naira, it has also utilized its OMOs to absorb surplus money market liquidity.

From June 2023, when currency currency restrictions were eased, the value of the Nigerian Naira has decreased by around 70% relative to the US dollar. The currency rate-calculating FMDQ released statistics on Thursday that showed it weakening to finish at 1,586.7 per dollar from 1,548.7 the previous day.

CBN takes over N21 trillion left in dormant accounts

Legit.ng reported that the Central Bank of Nigeria (CBN) has issued a new directive to Nigerian financial institutions regarding dormant accounts.

The new directives disclose that the CBN will take over the funds left in the accounts and invest them in treasury bills and other securities.

According to the circular issued on Friday, July 19, 2024, and signed by the bank’s Ag Director of Financial Policy and Regulation Department, John Onojah, the bank disclosed that it shall open and maintain an account meant for warehousing unclaimed balances in banks and other financial institutions in Nigeria.

Source: Legit.ng