Surge In Interest Rates As CBN Prepares For Record-breaking N1 Trillion Treasury Bill Auction

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The Central Bank of Nigeria (CBN) is poised to make history with its upcoming Treasury Bill auction scheduled for February 7, 2024, aiming to raise an unprecedented N1 Trillion. This monumental figure, as indicated by historical CBN data, is set to break previous records.

Insiders with insight into the CBN’s forex reforms have hinted at the likelihood of interest rate hikes ranging between 100 to 300 basis points during the forthcoming Monetary Policy Committee (MPC) meeting. These projections are in line with estimates from Bloomberg; foreseeing a potential increase of approximately 500 basis points.

The resultant uptick in interest rates, is a signal to the CBN’s shift towards a more restrictive monetary policy stance. This strategic manoeuvre is geared towards tackling Nigeria’s mounting economic challenges; particularly as it concerns inflation and exchange rate stability.

Recent data from January auctions reveal that the CBN successfully offloaded treasury bills worth N381.2 Billion across various maturity periods, with interest rates ranging from 5 Percent to 11.54 Percent.

The forthcoming auction on February 7th is anticipated to set a new benchmark with an immense N1 Trillion up for grabs. This allocation includes N600 Billion earmarked for the 364-day tenure and N200 Billion for the 182-day and 91-day bills respectively.

This proactive adjustment in monetary policy underscores the CBN’s commitment to addressing liquidity surplus and fostering economic stability. By absorbing excess liquidity, the CBN aims to mitigate inflationary pressures and bolster the naira value; thereby supporting sustainable economic growth.

In response to the prevailing economic challenges, CBN Governor, Yemi Cardoso outlined short-term measures aimed at attracting forex inflows, including rate adjustments and lifting capital controls.

As market participants eagerly await the outcome of the CBN’s monetary policy adjustments, the broader implications for Nigeria’s economy remain a focal point of interest. The effectiveness of these measures in curbing inflation and stabilising the exchange rate will play a pivotal role in shaping the country’s economic trajectory in the foreseeable future.

Meanwhile, secondary market trades for treasury bills indicate a bearish trend, with average yields witnessing a 2.06 Percent increase; settling at 11.91 Percent. Sell-offs across all tenors dominated the naira fixed-income market.

 

 

 

 

 

 

 

 

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