The Central Bank of Nigeria (CBN) cut stop rates on two key tenors at its March 25, 2026, Treasury Bills (NTB) auction, as excess system liquidity—estimated above N8 trillion—continued to suppress yields and fuel aggressive investor demand.
Auction results showed that rates on the 182-day and 364-day instruments declined by 20 basis points to 16.42% and 16.43%, respectively, while the 91-day bill held firm at 15.95%.
The move reinforces a growing trend of yield compression in Nigeria’s fixed income market, following the Monetary Policy Committee’s recent shift toward a more accommodative stance.
The moderation in yields follows the recent Monetary Policy Committee (MPC) decision to ease benchmark rates, reinforcing expectations of a gradual softening in Nigeria’s fixed-income market.
Demand dynamics at the auction reflected a clear divergence across maturities, with the 364-day instrument dominating investor interest.
The long tenor attracted N2.73 trillion in subscriptions against an offer of N200 billion, prompting the CBN to allot N394.88 billion.
In contrast, the 91-day bill saw near-full subscription at N98.71 billion versus a N100 billion offer, with N97.75 billion allotted, while the 182-day instrument lagged, recording N66.58 billion in bids against N100 billion offered and an allotment of N28.04 billion.
The pattern underscores a barbell investment strategy, where market participants either stay short for liquidity or extend duration to lock in yields ahead of further rate declines.
Overall subscriptions significantly exceeded the combined N400 billion offered, driven largely by aggressive positioning in the 364-day paper. The CBN’s higher allotment on the long tenor reflects responsiveness to demand at the far end of the curve.
Bid rates showed notable dispersion, particularly on the 364-day instrument, ranging from 15.95% to 19.50%, indicating varying yield expectations among investors.
Market analysts note that institutional investors are increasingly front-loading positions in longer-dated securities in anticipation of further monetary easing.
Recent auction trends reinforce this trajectory. On March 18, 2026, the CBN allotted N691.86 billion out of N1.05 trillion offered despite N3.06 trillion in total subscriptions.
Subscriptions reached N2.78 trillion at the March 11 auction, more than double the N850 billion on offer, while the March 4 auction recorded N2.34 trillion in demand with N1.01 trillion allotted.
In February, total subscriptions surged to N4.28 trillion, again with a strong bias toward the 364-day instrument.
These figures highlight a persistent liquidity overhang and sustained appetite for government securities, particularly at the long end of the curve.
Even in late 2025, the 364-day bill consistently attracted the bulk of subscriptions, with yields peaking around 17.5% before the current moderation trend set in.
The ongoing compression in yields reflects improved system liquidity and strong demand relative to supply, forcing investors to accept lower returns.
With excess liquidity still elevated, the direction of yields suggests continued downward pressure if current conditions persist.
Overall, the March 25 auction points to an inflexion phase in the fixed income market—where demand remains robust, but yields are beginning to soften—indicating a gradual transition toward rate normalisation.
