(Bloomberg) -- Nigerian Treasury bills were auctioned at a record high yield on Wednesday, a day after the central bank raised interest rates again in a bid to tackle inflation and support the nation’s currency.
The Central Bank of Nigeria sold 258.4 billion naira ($163 million) of one-year bills at a yield of 22.1%, the highest on record according to the data tracked by Bloomberg. Investor bids amounted to 1.37 times the amount of the securities on offer.
The central bank on Tuesday raised its benchmark interest rate by 50 basis points to 26.75% and pledged to rein in price pressures that are at a 28-year high.
It also widened its “asymmetric corridor,” lifting the cost at which lenders can borrow to 500 basis points above the policy rate and adjusting the return on their deposits to 100 basis points below the benchmark. It was previously plus 100 basis points and minus 300 basis points.
The higher yields offered by the central is helping reduce the switch from naira to dollar assets by Nigerians, Finance Minister Wale Edun said at a briefing in Abuja, the nation’s capital Thursday.
The “gap between inflation and investment yields is narrowing, resulting in the naira returning to being a store of value, thereby reducing the switch from naira to non-naira investments,” Edun said.
The adjustment of the asymmetric corridor “is an effectively tighter stance, aimed at further constraining liquidity in the financial system,” according to analysts at BancTrust & Co. They said it “suggests that rates on OMO and T-Bills could trend higher over the coming weeks,” referring to open market operations.
The central bank also sold 6.4 billion naira of 182-day bills at 19.5% and 13.1 billion naira of 91-day bills at a rate of 18.5%, up from 17.44% and 16.3% respectively.
The central bank has raised interest rates 12 times since March 2022 by a cumulative 15.25% percentage points and used its OMOs to mop up excess money market liquidity to help support the naira.
Nigeria’s currency has fallen around 70% against the dollar since currency restrictions were eased in June 2023. It weakened on Thursday to close at 1,586.7 per dollar from 1,548.7 the day before, according to data published by FMDQ, which calculates the exchange rate.
(Updates with comments from finance minister in paragraph five)
©2024 Bloomberg L.P.
