NTBs: CBN Spend N10.02trn on Primary Market Repayment in 12 Months

Kayode Tokede 

The Central Bank of Nigeria (CBN) has disclosed that it spent an estimated N10.3 trillion on primary market repayment in the 12 months of 2024 amid active engagement in the Nigerian Treasury Bills (NTBs) issuance.

This is about 133per cent increase over N4.3 trillion spent in 12 months of 2023.

Primary market repayment by the CBN refers to the repayment of matured NTBs issued in the primary market. In 2024, the CBN actively managed repayments as part of its broader liquidity and debt management strategy.  

According to financial data released by the CBN, primary market sales increased to N16.48 trillion in 2024, representing a growth of 85.5 per cent from N8.88 trillion in 2023.

Analysts stated that the hike in primary market sales and repayment is on the backdrop of CBN monetary policy measures to tackle inflation, manage liquidity and meet the Federal Government 2024 budget deficit.

They added that increased spending on NTB is due to higher interest rates that contributes to a larger government debt burden.

Analysts at Afrinvest Research in a report stated that, “In terms of impact, the increase in MPR is expected to lead to an upward repricing of fixed income instrument, especially short-term assets, ranging from NTBs to commercial papers which will naturally make these investments more attractive to investors compared to stocks.

“This trend is evident from the recent treasury bills auction, where the average stop rates across all instruments rose by 172 basis points to 20 per cent.  Additionally, we anticipate an elevated yield in the bonds market, though at a moderate pace. Conversely, pressure on interest expense and profit margins could dull outlook on corporate earnings, leading to subdued equities sentiment — other things equal.

“This might be a push factor to the fixed income space, while attractive yields pull investors in. In summary, cautious equities trading is advised especially in sectors negatively sensitive to interest rate. However, price moderation could provide good entry opportunities for tickers with strong track record, as interest tightening cycle might peak soon.”

It was learnt that the CBN increased the interest rate during its NTBs auction in 2024 amid efforts to woo the investing public.

For instance, the 91-day NTBs auction rate in December 2024 stood at 18 per cent from seven per cent in December 2023, while a 182-day rate moved from 10 per cent in December 2023 to 18.5 per cent in December 2024.

In addition, the rate on a 364-day closed December 11, 2024, at 22.8 per cent, as against 12.24 per cent in December 2023.

By tightening its monetary policy through higher interest rates and large NTBs auctions, the CBN aimed to curb rising inflation and stabilise the foreign exchange rate, thereby fostering a more balanced economic environment. 

THISDAY analysis of trading numbers showed that investors’ demand for long maturities NTBs continued to grow as its range bid reached 25.9 per cent as of December, the highest in 2024.

The variation in stop rates across tenors also offers insight into investor sentiment regarding short, medium, and long-term economic outlooks.

As the Nigerian government continues to struggle with its ‘scarce’ resources, experts have raised concerns about the increasing public debt portfolio which stood at over N134.3 trillion as of June 2024, stating that the amount needed to service such debt will consume a huge part of the government’s lean resources.

In a recent statement, the World Bank expressed deep concern over the escalating debt service costs that are burdening developing countries worldwide.

Commenting, the Vice President, Highcap Securities Limited, Mr. David Adnori said the increase in interest on these government bills can be negative for the fiscal position of the government and can create future worry for the country.

“Debt servicing in Nigeria over the past five years has been hovering around a range close to 100 per cent, this shows how precarious things are,” he said.

He said that excessive borrowing by the government can crowd out the private sector from the debt market.

On hike in NTB yield, Investment Banker and Stockbroker, Mr. Tajudeen Olayinka noted that the high yield to the factor of demand and supply, stressing that the government deliberately increased NTB supply to encourage a higher stop rate at 25.9 per cent or that some institutional investors held back their bids.

He added that, “The essence is to encourage foreign inflows that could help improve dollar liquidity in the foreign exchange market and cause a moderation in Naira exchange rate until the market attains equilibrium level.

“I do not doubt that this is the most appropriate decision on the part of CBN and the government at this time. There’s a need to improve dollar liquidity that will eventually force domestic interest rates to moderate subsequently. The higher interest rate will likely filter into the equity market to temporarily moderate the bullish sentiments in that market as well.”