Investors bought Nigeria’s one-year treasury bills at a rate of 5.9% per annum down from 6.2% per annum recorded in the previous bid.

This is despite an inflation rate of 22.4% year-on-year, suggesting they are happy to accept a negative real return of about -16.5%

The data was obtained from the latest auction report for Nigeria’s treasury bills sold during the week. The one-year bill matures on July 11, 2024.

Investors also staked a whopping N654.6 billion or 375% of the N137.5 billion that was eventually allowed.

An oversubscription indicates growing demand for risk-free investments despite offering a negative real return as the inflation rate was 22.4% in May (the June inflation rate was yet to be published).

By accepting to earn 5.24%, investors prefer the haven of government securities to other forms of investments such as equities or corporate bonds.

Nigeria’s equities market is currently experiencing one of its best runs in history, up 28% YtD.

Investors also staked N31.7 billion for the 182-day bill, however, the apex bank was only able to allot N1.48 billion suggesting a 20x oversubscription. Investors accepted an interest rate or stop rate of 3.5% for the 182-day bill.

For the 91-day bill, investors bid N5.8 billion as against the N2.7 billion allowed or accepted by the central bank. The interest rate was a paltry 2.86%.

Data from the DMO also indicates investors were happy to receive 9.75% for the two-year FGN Savings bond and 10.07% for the three-year savings bond.

Investors subscribed to N284.1 billion and N755.5 billion for the two-year and three-year FGN Savings bonds.

The auction results, as outlined in Table 1 below, demonstrate robust demand and oversubscription in the treasury bills segment

Optics: The oversubscription of the treasury bills auction indicates a growing demand for risk-free investments despite the negative real return it delivers.

Latest data from the central bank also reveal Nigeria has over N55 trillion in money supply which has contributed to galloping inflation.
Most of the money will find its way into risk-free investments such as treasury bills and FGN bonds.
Some investors who spoke yesterday to this medium also suggest the reason for the oversubscription of treasury bills is due to a lack of depth in the equities market.
As such, the only market that can constantly absorb investable funds is the treasury bills and/or money market.