Towards the end of 2019, the Federal Government of Nigeria bifurcated the bills (T. bills and OMO bills) and the rates of T. bills have been on a steady decline with rates as low as 1.15% which was recorded in August 2020. Treasury bills fell to record lows in 2020 as a result as there was increased demand for government instruments owing to a flight to safety by both institutional and retail investors, also, the slim investment opportunities in the domestic market pushed yields to depressing levels.
Prices move inversely to yields, that is, an increase in demand for these instruments pushes the yields down. January 2020 recorded the highest average discount rates of T. bills at the primary market, rates started to decline in March but continued for the rest of the year.
The Nigerian treasury bills market contributed 54.13% to the total turnover of the fixed income and currency market. Average discount rates at the primary market for the 91-day T-bill for 2020 was 1.63%, while the 182-day and 364-day notes were 2.15% and 3.45% respectively.
Oversubscription of the Nigerian treasury bills was the norm in the fixed income market for the year 2020 as a result of increased demand. However, the oversubscription trend seems to be trending downwards even though the instruments are still oversubscribed but not at a high percentage recorded at the beginning of the year. In January 2020, 91-day was oversubscribed by 792.48% while the 182-day and 364-day T. bills were oversubscribed 230.56%, and 43.79% respectively. In August 2020 same tenors were oversubscribed by 53.07%, 77.54%, and -7.64% respectively, the 364-day bill was undersubscribed. The decline in the oversubscription trend is a result of depressed yields and a move to the Nigerian Equity market (see chart 4 below).
Chart 5: Average Discount Rate for T. Bills at the Primary Market 2020 (%)
Source: FMDQ, Proshare Research
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