The Central Bank of Nigeria successfully sold N1.3 trillion worth of treasury bills on Wednesday, March 6, 2024, at a very high rate, targeting foreign portfolio investors (FPIs)....CONTINUE READING
This is part of CBN’s efforts to attract liquidity to strengthen the naira, which has been experiencing a free fall lately due to a shortage in forex supply.
How do treasury bills work?
Treasury Bills, also known as T-Bills, are government-backed, short-term securities issued by the CBN. They are issued when the government needs to borrow funds for some time. They have a maximum maturity of 364 days.
Treasury Bills are sold through a bi-weekly auction by the CBN. Buyers quote bids, and the average minimum bid is selected.
The government sells these bills at a lower price (lower than face value).
Next, the investor holds on to the T-Bills until the maturity date and, eventually, is paid the full price of the face value.
Details of the latest CBN treasury bill sale
The apex bank took to the market N312.9 billion worth of the 364-day but received bids valued at N1.5 trillion from investors.
At the end of the exercise, however, the CBN allotted N1.3 trillion to successful subscribers at 21.49% after the range of bids was between 17.00% and 27.00%
The CBN will use the funds realised from the market to support the naira in the forex market and bring the exchange rate below N1,500/$.
