The Central Bank of Nigeria (CBN) is offering N800 billion in Treasury Bills as banks’ deposits with the apex bank approach N7 trillion, amid substantial liquidity inflows into the financial system.
The auction, scheduled for Wednesday, October 28, is being conducted on behalf of the Debt Management Office (DMO), with banks’ placements at the CBN’s Standing Deposit Facility (SDF) reaching N6.98 trillion on Tuesday, according to market data reported by Nairametrics.
The offer comprises N100 billion in 91-day bills, N100 billion in 182-day bills and N600 billion in 364-day bills. The one-year instrument accounts for 75 per cent of the total offer.
The auction comes as the Financial Markets Dealers Association (FMDA) projects N2.813 trillion in inflows into the financial system during the week, largely from maturing financial instruments.
Open Market Operations (OMO) maturities are expected to contribute N2.408 trillion, while Federal Government bond coupon payments will provide N263.58 billion. Treasury Bills maturities are projected at N130.72 billion.
The expected inflows follow the settlement of N2.132 trillion in OMO maturities and N53.493 billion in primary market maturities on Tuesday, adding to available funds in the financial system.
However, the N800 billion Treasury Bills offer exceeds scheduled Treasury Bills maturities of N130.72 billion by N669.28 billion. If fully allotted, the auction would absorb that additional amount relative to the funds released through the maturing bills alone.
The actual impact on market liquidity will depend on investor subscriptions, the final amount allotted and the extent to which investors reinvest proceeds from maturing securities.
The latest offer also provides investors an opportunity to lock funds into government securities, particularly the one-year instrument, amid continued demand for longer-tenor Treasury Bills.
At the October 7 auction, investors submitted N1.683 trillion in bids for the 364-day bill, while its stop rate fell to 15.85 per cent.
The latest auction will test investor appetite for government securities and the extent to which the DMO can attract excess liquidity without significantly raising borrowing costs.
