The Central Bank of Nigeria (CBN) sold N446.15 billion worth of Treasury bills during the month of August 2022. This was a 9.47% increase over the N407.55 billion allocated in June. With regard to the 91-day tenor specifically, the CBN sold N3.43 billion in total in August 2022 as opposed to N5.97 billion in July 2022, a 43% decrease.
While the amount sold for the 364-day tenor climbed by 8% to N431.19bn from N398.83bn in the preceding month, the amount sold for the 182-day tenor increased by 319% to N11.52bn in August 2022 from N2.75bn in July 2022. As investors kept looking for alternatives to invest in securities with greater yields, the 364-day bills accounted for 94.21% of all sales. The CBN has sold N3.34 trillion worth of Treasury bills so far this year, 34% more than the N2.5 trillion that was up for grabs.
The sales in August were at greater costs than anticipated due to gradually rising stop rates. The 91-day stop rate jumped from 3.5% at the August 10 auction, 2.8% (July 27), and 2.75% at the August 24 sale to 4.0%. (July 13). Similar to how the 182-day stop rate increased to 5% on August 24 from 4.5% on August 10, 4.1% on July 27, and 4% on July 13, the 364-day stop rate increased to 8.5% on August 24, 2022 from 7.45% on August 10, 7.0% on July 27, and 7.0% on August 24. (July 13).
Additionally, the Central Bank of Nigeria has sold N800 billion through Open Market Operations (OMO) so far this year, 13% more than the N710 billion provided. OMO auctions, however, were not held in April, July, or August. In addition to the short-term instruments, the Federal Government sold N1.72 trillion worth of FGN Bonds, 9.41% more than the N1.58 trillion that was up for grabs.
Overall, the Federal Government sold N5.86 trillion year to date, 22.58% more than the N4.78 trillion that was available for sale. Although an increase in Treasury bill rates due to inflation’s continuous rise and the MPR’s increase is to be expected, it is important to highlight that the Federal Government currently has little capacity to absorb any sizable increase in borrowing costs. The federal government’s entire revenue for the same period, N1.63 trillion, was eclipsed by debt servicing costs of N1.94 trillion as of April, according to Zainab Ahmed, minister of finance, budget, and national planning.