CBN Increases Rate on Treasury Bills to Attract more Dollar Inflows

The Central Bank of Nigeria (CBN) hiked the interest rates on short term debt obligations or treasury bills on Wednesday in a bid to mop up naira liquidity and attract foreign investor inflows.

The CBN sold one trillion naira ($696 million) in treasury bills to both local and foreign investors at rates that were nearly twice the level of previous offers. Yields for the one-year bill rose to 19%, the highest in 12 years, from 11.5% at the previous auction on Jan. 24.

Three-months bill was sold at 17.24%, which was three times more than the January offer of 5%, while six-month notes fetched 18%.

The 19% rate on the 364-day bills takes it above the central bank’s policy rate, which currently stands at 18.75%, for the first time. It is also narrows the gap on the inflation rate, which stood at nearly a three-decade high of 28.9% in December.

The auction suggests the central bank is seeking to normalize interest rates in Africa’s most populous nation and lure foreign investors in a bid to stabilize the naira.