Yemi Cardoso, Central Bank of Nigeria (CBN) governor, targeted investors with a record 29.87 percent yield on one-year treasury bills on Wednesday trading.
The CBN’s record yield was not just aimed at wooing investors but also targeted at halting foreign exchange (FX) speculation, analysts told BusinessDay.
“I think Cardoso is trying to reduce people speculating on the FX by luring them with higher yields. After all, the essence of buying FX is for capital appreciation,” Ayodeji Ebo, managing director Optimus by Afrinvest, a wealth management app, said.
The yield on the one-year T-bills increased to 29.87 percent on Wednesday from 26.02 percent seen in earlier trading day. The 29.87 percent is the highest on record.
Ebo explained that a near 30 percent yield on the one year T-bills is a better return for speculators over mere gains from a volatile exchange rate.
Africa’s largest crude producer has struggled to stabilise its currency since it was allowed to trade freely against the dollar in June last year.
The embattled naira has been on a very volatile path in months, attaining the third worst performing currency in the world in October.
The naira fell to a low of N1681.65/$ on Wednesday from N1682.05 the previous day, according to data by FMDQ Securities Exchange, which tracks FX data.
Read also: Investors’ quest for higher returns drives 1-year T-bills yields to 26.02%
Investors were attracted to the one-year T-bills, oversubscribing them in the Wednesday trading.
Ebo said that the government’s need for liquidity was also a reason for the large sell off.
A total of N626.33 billion T-bills were sold. This was higher than the N513.43 billion maturing bills rolled over by the CBN on Wednesday, November 6.
Wednesday’s auction was significantly higher than the N374.66 billion from the previous auction, representing the highest borrowing level since April 2024.
The Cardoso-led Monetary Policy Committee (MPC) has jacked up the interest rate by 850 basis points to 27.25 percent, from 18.75 percent at the start of the year to combat rising inflation. This has led to an equal increase in the yields of treasury bills compared to last year.
The oversubscription happened amid liquidity mop-up on Tuesday through Open Market Operations (OMO) auctions, which maintained a yield of 32 percent on its 364-day bills.
The shorter treasury bills saw a minimal interest by investors. Only N13.99 billion of the N20.74 billion 91-day bill was sold.
Similarly the 182-day bill got only N3.40 billion allotment, despite a N5.43 billion offer.
Yields on the 182-day and 91-day bills increased for the first time in three auctions to 20.39 percent and 18.86 percent respectively.
