The Federal Government borrowed just N71.16bn from investors at Wednesday’s Treasury bill auction, turning down the bulk of subscriptions despite receiving bids worth more than twice its planned offer.
Results of the 28 October auction showed that investors submitted N1.91tn in bids against an advertised N800bn offer by the Debt Management Office, which conducts the sale on behalf of the government through the Central Bank of Nigeria.
However, only N71.16bn was allotted, leaving about N1.84tn in bids unaccepted and taking actual borrowing to less than one-tenth of the amount initially offered.
The outcome suggests that the government was unwilling to accept the yields demanded by investors, particularly on one-year securities, even as excess funds in the banking system fuelled strong demand for government debt. The 364-day Treasury bill, which accounted for most of the subscriptions, recorded bids of about N1.84tn against an offer of N600bn. The DMO accepted just N38.38bn, leaving the overwhelming majority of investors’ bids unfilled.
The latest results indicate that the government is prioritising lower borrowing costs over raising the full amount advertised at the auction.Investors had offered yields ranging from 15.00 per cent to 18.24 per cent on the one-year instrument, but the government settled at 15.80 per cent, down from 15.90 per cent at the 14 October auction.The 91-day bill cleared at 15.40 per cent, while the 182-day instrument settled at 15.79 per cent.
For investors, however, the decision means that submitting bids does not guarantee an allocation, even when demand significantly exceeds the government’s borrowing target.
The October auction was the second consecutive sale in which the DMO rejected a substantial portion of bids, reinforcing the authorities’ reluctance to accommodate investors seeking higher returns on short-term government securities.
At the 14 October auction, the DMO also rejected a significant proportion of subscriptions, while the one-year stop rate rose to 15.90 per cent.
The latest decline reverses that increase and extends the broader downward movement in T-bill yields recorded in recent months. The one-year rate has fallen from 17.59 per cent in August to 15.80 per cent, a decline of 1.79 percentage points.
The restrained borrowing came as liquidity in the banking system rose to N8.59tn before the auction, from N6.94tn at the close of the previous week.
The increase was supported by N2.13tn in Open Market Operations maturities, which released funds into the financial system and helped sustain demand for short-term government securities.However, the availability of funds did not translate into higher borrowing by the government. Instead, the DMO limited its acceptance of bids, particularly those carrying higher interest-rate demands.