By Stanley Opara with agency report

Friday, 4 Feb 2011

The Federal Government plans to auction a total of N109.27bn ($716m) in 91-day, 182-day and 364-day debt next week, the Central Bank of Nigeria has said.

The regulator said on Thursday that it would issue N39.27bn in 91-day bills, N40bn in 182-day bills and N30bn in 364-day bonds next Thursday, using the Dutch Auction System.

The result would be released the following day, Reuters quoted the apex bank as saying.

Traders said liquidity from budgetary allocations last month had thinned out, but expected the offer to be oversubscribed due to improving yields after the CBN raised its key interest rate to 6.50 per cent from 6.25 per cent a week ago.

The Federal Government issues treasury bills regularly as part of monetary control measures to curb inflation and help banks manage their liquidity.

The country on January 14, sold N135.57bn ($880m) in treasury bills as part of measures to control money supply in the economy.

The CBN sold N45.84bn at 10.19 per cent in 364-day treasury bills, N45.40bn in 182-day paper at 9.45 per cent and N44.33bn in 91-day papers at 7.59 per cent.

Traders said the bulk of the funds invested in the treasury bills then, were rolled over from the previous issue, which matured during the week.

However, on December 9 last year, N115bn ($758m) worth of treasury bills were sold by the regulator.

The CBN sold N50bn at 10.25 per cent in 364-day treasury bonds, N45bn at 9.75 per cent in 182-day papers and N20bn at 7.4 per cent in the 91-day instruments at its auction.

Yields on the papers were generally lower compared to the last auction.

At its previous auction in November, the CBN sold 364-day bonds at 10.24 per cent, the 182-day paper at 9.75 per cent and 91-day bills at 7.75 per cent.

Experts, however, believed that tough bidding processes were a way of selling treasury bills. The returns from the investments are of more importance than say, the payment of fixed interests, they argue.

They are sold the most through the Open Market Operations, as that seem to be the most commonly bought form of investment.

The returns from the investment are usually the difference between the price of the bills and their face value at the point of time of maturity.

Source: Punch