Investors bid N384 billion worth of one-year treasury bills at a rate of 12.15%, but only N255 billion was allotted due to oversubscription in the latest auction on 26th July 2023.
Rising inflation in Nigeria, reaching 22.79% in June 2023, contributes to the demand for risk-free investments despite offering a negative real return of -10.64%.
The lack of investable assets in the economy forces investors to accept negative real returns, earning zero interest and losing value to inflation on their cash holdings.
The 182-day treasury bill also saw significant oversubscription, with investors staking N6.4 billion, but the apex bank could only allot N1.3 billion at an 8% interest rate.
Similarly, for the 91-day bill, investors bid N7.8 billion compared to the N1.7 billion offered by the central bank at a 6% interest rate.
Opinion: The high demand for risk-free investments despite negative real returns highlights the challenges faced by investors in Nigeria’s economy. Inflationary pressures contribute to the erosion of purchasing power, making it essential for the government and policymakers to address the lack of investable assets and create an environment conducive to positive real returns.