The Central Bank of Nigeria (CBN) is set to reissue N2.2 trillion worth of maturing Nigerian Treasury Bills (NTBs) in the fourth quarter of 2024.
This is part of the government’s efforts to manage liquidity, sustain the financial market, and maintain economic stability, as outlined in the newly released 2024 Issue Calendar.
Treasury Bills (T-Bills) are short-term debt securities issued by the government to finance its operations. Here are some key points about T-Bills:
Maturity Period: T-Bills have a maturity period ranging from a few days to one year. Common terms include 4, 8, 13, 17, 26, and 52 weeks.
Purchase Price: They are sold at a discount to their face value. For example, you might buy a T-Bill for ₦95,000, and when it matures, you receive ₦100,000. The difference represents the interest earned.
Interest Rates: T-Bills do not pay periodic interest. Instead, the interest is the difference between the purchase price and the face value at maturity.
Safety: T-Bills are considered one of the safest investments because they are backed by the government’s credit
Liquidity: They are highly liquid, meaning they can be easily bought and sold in the secondary market.
Taxation: Interest earned on T-Bills is subject to federal taxes but is usually exempt from state and local taxes.
Investment Amounts: T-Bills can be purchased in increments as low as ₦100, making them accessible to a wide range of investors.
Breakdown of Issuances
The calendar provides a detailed schedule of auction and settlement dates, as well as the volume of NTBs set for re-issuance:
- 91-day bills: N158.8 billion
- 182-day bills: N109.6 billion
- 364-day bills: N1.9 trillion
- Total: Approximately N2.2 trillion
Specific Auctions:
- September 4-5, 2024: N233.3 billion across all maturities.
- September 11-12, 2024: N161.9 billion will be reissued.
- September 25-26, 2024: N227.5 billion, with a significant portion in 364-day bills.
- October 9-10, 2024: N81.9 billion.
- October 23-24, 2024: N374.7 billion across all maturities.
- November 6-7, 2024: N513.4 billion, representing the second-largest single re-issuance of the quarter.
- November 20-21, 2024: N610.8 billion, marking the quarter’s final auction.
The total re-issuance for the quarter includes N158.8 billion in 91-day bills, N109.6 billion in 182-day bills, and N1.9 trillion in 364-day bills, amounting to approximately N2.2 trillion.
Starting with the auctions scheduled for September 4-5, 2024, a total of N233.3 billion will be issued across 91-day, 182-day, and 364-day maturities.
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Following the initial auction, the CBN has planned another NTB issuance for September 11-12, 2024, where a total of N161.9 billion will be re-issued.
Later in the month, on September 25-26, 2024, the CBN will conduct another issuance of N227.5 billion in NTBs, with the 364-day bills making up the largest portion of the issuance.
As the quarter progresses, the auction scheduled for October 9-10, 2024, will see the CBN re-issue NTBs worth N81.9 billion. Although this issuance is relatively smaller compared to others in the quarter, it will still play an important role in maintaining liquidity in the financial markets.
On October 23-24, 2024, the re-issuance program will gain momentum with a larger auction totaling N374.7 billion across 91-day, 182-day, and 364-day maturities.
Another re-issuance of the quarter is scheduled for November 6-7, 2024, where the CBN will issue NTBs totaling N513.4 billion. This auction will be the second-largest single re-issuance of the quarter and is expected to attract significant interest from investors seeking secure and high-yielding investments.
The final auction for the quarter, scheduled for November 20-21, 2024, will close out the re-issuance program with an issuance of N610.8 billion. This final issuance will ensure that the financial system remains liquid as the quarter ends, while also providing the government with the necessary funds to meet its short-term obligations.
Key Points to Note:
The re-issuance of NTBs is a strategic tool used by the CBN to manage liquidity, control inflation, and stabilize the naira. By rolling over maturing bills, the CBN aims to mitigate the impact of maturing obligations on government finances while offering investors a secure investment option.
However, concerns have arisen over the rising interest rates and the associated costs to government revenue. The CBN reportedly incurred an estimated N1.55 trillion in interest payments for the 12 successful Treasury Bills (T-Bills) auctions conducted in the first six months of 2024.
This figure is significantly higher (654.7%) than the N205.63 billion recorded during the same period in the previous year.
Data from the CBN shows that Treasury Bills worth N8.4 trillion were sold in the first half of the year across various tenors (91-day, 182-day, and 364-day). The stop rates (interest rates accepted from the bids) ranged from as low as 2.44% for some 91-day bills to as high as 21.49% for 364-day bills.
The high interest cost is largely attributed to the CBN’s hawkish monetary policy aimed at curbing rising inflation, which led to aggressive rate hikes earlier in 2024 as part of efforts to reduce the money supply in the economy.
Earlier this month as reported by businesstimesnewspaper The Central Bank of Nigeria (CBN) sold N162.72 billion worth of one-year T-Bills , exceeding the amount initially offered due to a 300 percent oversubscription, totaling N431.58 billion.
Segun Adams, a research analyst at Afrinvest West Africa Limited, noted that the slight decline in the stop rate for longer-term bills highlights a shift in bargaining power in favor of the Debt Management Office (DMO), which issues these bills through the CBN.
The Central Bank of Nigeria (CBN) re-issuing ₦2.2 trillion in Treasury Bills in Q4 2024 and the recent sale of ₦216.09 billion in T-Bills as yields decline lies in the CBN’s broader monetary policy and liquidity management strategy.
- Liquidity Management: The CBN regularly issues and re-issues Treasury Bills to manage liquidity in the financial system. By selling T-Bills, the CBN can absorb excess liquidity, which helps control inflation and stabilize the currency.
- Market Demand and Yields: The decline in yields on the recent ₦216.09 billion T-Bills sale suggests strong demand for these securities. When demand is high, investors are willing to accept lower returns, leading to lower yields.
- Future Issuances: The planned re-issuance of ₦2.2 trillion in T-Bills in Q4 2024 indicates the CBN’s ongoing efforts to manage liquidity and meet government financing needs. The success of recent T-Bill sales, even at lower yields, may encourage the CBN to continue using this tool.
Both actions are part of the CBN’s strategy to manage the money supply, control inflation, and ensure financial stability. The recent decline in yields reflects market conditions that could influence future T-Bill issuances.
