Nigeria allotted ₦509.40 billion in Treasury bills at the auction on Wednesday, 4 November. The Central Bank of Nigeria conducted the sale on behalf of the Federal Government. The Financial Markets Dealers Association’s report puts the amount initially offered at ₦800 billion and the value of bids received at ₦2.04 trillion.
The three figures tell a borrower and a saver different things. The offer was the amount announced for the auction. The bids showed how much investors sought to buy at the rates they proposed. The allotment was the amount actually accepted. Strong interest in the sale consequently produced neither a ₦2 trillion borrowing nor a sale of the full ₦800 billion offered.
One maturity accounted for most of the interest. Investors bid for about ₦1.99 trillion of 364-day bills, against an offer of ₦600 billion. Of those bids, ₦461.84 billion was allotted. For every naira of one-year bills on offer, investors sought more than three naira’s worth, but a bid did not guarantee an allocation.
The shorter maturities had a different outcome. There were ₦100 billion of 91-day bills on offer and another ₦100 billion of 182-day bills. Bids came to ₦25.01 billion and ₦25.83 billion respectively. Demand across the sale as a whole therefore says little about how much money chased a particular repayment date.
The stop rates, which mark the cut-off at the auction, were 15.40 per cent on the 91-day bill, 15.79 per cent on the 182-day bill and 15.80 per cent on the 364-day bill. The association reported that all three were unchanged from the previous Treasury bills auction.
What it means for you. If someone quotes the 91-day figure, check both the period covered and how the price was calculated. An annualised auction rate of 15.40 per cent does not promise ₦15.40 in cash after 91 days for every ₦100 paid. The original auction result also does not establish the price at which a bill can be bought later.