The Central Bank of Nigeria is expected to conduct a Primary Market Auction on Wednesday where a total of N115.1bn across the 91-day (N23.4bn), 182-day (N38.8bn) and 364-day (N59.9bn) tenors is expected to be rolled over.

The 91-day tenor has an offer amount of N24.37bn and is expected to have a stop rate range of about 10.90 per cent to 11 per cent. In the primary market, the CBN conducts T-Bills auction usually every fortnight and requests investors to quote the rates they are willing to pay on the different tenors. At the auction, the maximum rate at which the CBN is willing to sell is called the stop rate.

The 182-day tenor has an offer amount of N38.751bn and a last stop rate of 13.40 per cent, while the 364-day tenor has an offer amount of N52bn and last stop rate of 14.95 per cent. The Treasury Bills secondary market last week traded on bullish sentiments as investors’ anticipation of OMO auctions fell flat as the CBN held-off in a bid to ease pressure on system illiquidity.

The average yield across tenors declined by 0.6 per cent week-on-week to 14.2 per cent from 14.9 per cent. The April 2019 bills recorded the highest declines as the 04-Apr-19 dropped by 4.3 per cent week-on-week, while the 18-Apr-19 declined by 5.1 per cent week-on-week. The CBN conducted only two OMO auctions last week to investors’ dismay.

The apex bank issued a no-sale result at the first auction, which held on Monday, despite the 325.9 per cent over-subscription to its total offer of N30bn (vs N127.8bn subscription) across the 101-day, 178-day, and 353-day tenors. Analysts said the decision of the CBN was to ease system liquidity on Monday.

At the second intervention on Thursday, the CBN prorated its allotment — for the first time in months — on its long-term offer of N400bn with an allotment ratio of 0.8x due to the significant demand (bid-to-cover ratio of 1.8x) while the short and medium-term offers of N50bn and N100bn witnessed moderate demand, resulting in a bid-to-cover ratio of 0.2x and 0.5x, respectively.

Analysts at Afrinvest Securities Limited said, “Furthermore, we envisage that this bullish trend in the secondary market will persist into this week following the reduction in the frequency of OMO auction offers.

“We expect the CBN to ease up on its tight stance on liquidity (N609.9bn in the negative as at Thursday) despite the T-Bills and OMO maturities worth N464.8bn scheduled to hit the financial system. “Thus, we advise investors with long-term interests to take advantage of the attractive rates in the primary market.”



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