The Monetary Policy Rate, MPR, has increased as a result of the tight monetary policy regime implemented by the Central Bank of Nigeria (CBN), which has caused the Debt Management Office (DMO) to raise interest rates on Treasury Bills (TBs) by 340 basis points (bpts).
The CBN increased the MPR twice in 2022 to address the inflation rate's continuing increasing trend: once by 150 bpts on May 24, 2022, and once by 100 bpts on July 19, 2022.
According to research by Vanguard, DMO has gradually boosted interest rates on auctions of Nigerian Treasury Bills, or NTBs, in an effort to satisfy the demand for higher interest rates brought on by the central bank's new position on monetary policy.
The DMO sold N150.62 billion worth of NTBs two days ago, and findings from the result of the sales show that DMO raised the stop rate (maximum interest rate) on the 91-days and 182-days bills to 2.8 per cent and 4.1 per cent, respectively. The stop rate for the 364-days bills was, however, left at 7.0 per cent.
This week’s interest rate mark up is the third by DMO since May 24, 2022.
Consequently, DMO has raised the stop rate for the 91-days bills by 300 bpts from 2.5 per cent on May 25, while it raised the stop rate for the 184-days bills by 210 bpts from 3.89 per cent on May 25. The debt agency also raised the stop rate on the 364-days bills by 510 bpts from 6.49 per cent on May 25.
With this the average interest rate on NTBs shows a 340 bpts rise to 4.63 per cent at the auction held on Wednesday from 4.29 per cent at the auction held on May 25 a day after CBN’s first MPR raise.
Meanwhile, and in apparent response to the rise in interest rate, the NTB auction held on Wednesday recorded improved patronage as the amount of bills demanded by investors exceeded the amount offered by DMO by N56 billion or 21 per cent. This represents a 19.5 percentage increase when compared with the N2.2 billion or 1.5 per cent oversubscription recorded at the previous auction held on July 27.