Ahead of Auction | Nigerian Treasury Bill | May 16 2019

The Central Bank of Nigeria will be holding their 6^th NTB auction of the year where it plans to rollover N50 billion worth of Nigerian Treasury bills split between 91 Day – N18 billion, 182 Day – N17 billion and 364 Day – N20 billion.

Tenor	Amount sold at the last auction (N billions)	Previous stop rates	Amount on offer tomorrow (N billions)
91	5.8	10.29%	5.8
182	29.2	12.6%	29.2
364	23.3	12.85%	23.3

Our take. With the recent approval of the N8.9 trillion appropriation bill by the Senate, the stage appears set for a ramp up in borrowings over the rest of the year. In fact given the lower NTB maturity profile over the next few months and lower interest rate environment, the case for NTB net issuance at tomorrows auction appears reasonably priced. However, if recent trend at the NTB auctions are anything to go by, we see FG maintaining its unflinching stand towards rolling over maturing NTBs in a bid to trim its cost of debt service.

That said, going into tomorrow’s auction, we rule sizeable NTB issuance and at best see FG rolling over its entire maturity for tomorrow. Also in line with recent pattern, coupled with pent up liquidity in the system, we see build up in demand at the 364 Day leg which bodes well for FG’s bargaining power. Assembling these factors, we see room for lower rates at tomorrow’s auction. Please our expectation below:

PRIMARY MARKET CALENDAR & STOP RATES
(TREASURY BILLS)
DATE	91 DAYS	182 DAYS	364 DAYS
16-May-19	13.35% – 13.71%	17.35 – 18.34%	13.56% – 14.00%
02-Aug-17	13.42%	17.40%	18.53%
19-Jul-17	13.43%	17.40%	18.55%
05-Jul-17	13.50%	17.50%	18.60%
21-Jun-17	13.50%	17.50%	18.65%
14-Jun-17	13.50%	17.30%	18.69%
31-May-17	13.40%	17.14%	18.65%
17-May-17	13.50%	17.15%	18.70%
03-May-17	13.60%	17.26%	18.82%
19-Apr-17	13.60%	17.40%	18.98%
05-Apr-17	13.55%	17.21%	18.74%