CBN Set to Conduct Sixth Treasury Bills Auction of the Quarter on December 11, 2024

Introduction
The Central Bank of Nigeria (CBN) will conduct its sixth Treasury Bills (T-Bills) Primary Market Auction (PMA) of the quarter on December 11, 2024. The auction will involve the rollover of maturing bills worth ₦275.71 billion, distributed across 91-day, 182-day, and 364-day tenors. This auction is part of the CBN’s strategy for liquidity management and financing short-term government obligations, offering opportunities for investors to earn attractive returns.

Details of the Upcoming Auction

The maturing bills to be rolled over are segmented as follows:

• 91-day bills: ₦10.84 billion
• 182-day bills: ₦8.37 billion
• 364-day bills: ₦256.51 billion

The auction will be conducted using the Dutch auction system, a transparent process where accepted bids are allocated at the stop rate.

Stop Rates: Recent Trends

In recent auctions, the stop rates for T-Bills have varied based on market dynamics and investor demand:

• 91-day bills: 18.00%
• 182-day bills: 18.50%
• 364-day bills: 23.50%

These rates make T-Bills an attractive investment option, especially for investors seeking low-risk, short-term returns.

Significance of the Auction

1. Liquidity Management:
   The CBN uses T-Bills auctions to manage liquidity in the financial system, ensuring stability and addressing short-term government financing needs.
2. Attractive Returns for Investors:
   High stop rates offer an opportunity for investors to earn competitive returns, particularly in the current high-interest-rate environment.
3. Market Activity Indicator:
   The auction reflects investor confidence and demand in the fixed-income market, serving as a barometer for economic sentiment.

How to Participate

Investors interested in participating in the auction are advised to:

• Submit their bids through authorized dealers, including banks and discount houses.
• Ensure compliance with the CBN’s stipulated bidding timeframe and procedures.

What This Means for Nigerian Investors

Treasury Bills remain a favored option for investors seeking:

1. Capital Preservation:
   Backed by the Federal Government, T-Bills are among the safest investment instruments available.
2. Liquidity:
   The relatively short tenors allow investors to meet immediate cash flow needs without locking in funds for extended periods.
3. Portfolio Diversification:
   Adding T-Bills to an investment portfolio reduces overall risk, especially during periods of market volatility.

Challenges and Considerations

1. Inflation Impact:
   While T-Bills offer attractive returns, the real yield may be eroded by Nigeria’s high inflation rate, currently above 30%.
2. Access for Retail Investors:
   Participation thresholds may limit direct access for smaller retail investors, who might consider indirect investments through mutual funds or savings bonds.

Conclusion

The CBN’s December 11, 2024, Treasury Bills auction represents a vital tool for liquidity management and offers lucrative opportunities for investors in Nigeria’s fixed-income market. As T-Bills continue to provide safe and competitive returns, both institutional and retail investors should consider leveraging this investment vehicle to enhance their portfolios.

For more information, investors are encouraged to contact authorized dealers or refer to the CBN’s official invitation to tender.