The Debt Management Office, DMO, on Wednesday debunked insinuations that interest rates on Treasury Bills were usually pre-determined by government before they are offered for buyers
In a statement issued to clarify some misgivings about the issue, the Office pointed out that different bidders usually attend the market with different rates, using the rates obtainable at the secondary market to guide their investment decisions.
The DMO stated: “Investors bid at the NTBs auction at their own interest rates. Thus, the rates on the NTBs are not predetermined or determined by the CBN or the DMO. The rates at which the investors bid are entirely at their discretion but will typically depend on prevailing secondary market rates, their portfolio needs and investment preferences.
“In allotting to bidders oftentimes, the DMO and the CBN will also be guided by similar factors and the implications for markets and macroeconomic stability.
“Taking into account all these factors, the interest rates at the auctions will ultimately be determined by demand and supply. The claim that the CBN increased rates to attract investors at the NTB auction is not correct.”
Making further clarification on a news report linking the higher interest rates to fear of capital flight ahead of the 2019 general elections, the Office stated that “having highlighted the many factors considered by investors in the NTB as well as the key considerations of the DMO, and equally important, the fact that foreign investors still participate in the domestic fixed income securities markets, it is wrong to attribute the auction rate to fears about capital flight.
“To buttress this point, interest rates on the NTBs in the first half of 2017 were much higher than the present rates, at a time when there was no election approaching”, it stressed.
TBs are one of the Federal Government’s short-term debt instruments issued regularly by the DMO, through the Central Bank of Nigeria (CBN) which serves as the debt agency’s agent.
