The Central Bank of Nigeria (CBN) cut stop rates on longer-dated Treasury bills at its 25 March auction, even as investors poured in about N2.7 trillion in subscriptions for one-year instruments.
The move leveraged a liquidity surplus estimated at over N8 trillion in the financial system, enabling the government to reduce borrowing costs without dampening investor appetite.
Stop rates on the 182-day and 364-day bills fell by 20 basis points to 16.42 percent and 16.43 percent, respectively, while the 91-day bill held steady at 15.95 percent—signalling easing yield pressures despite strong demand for longer tenors.
The CBN offered N400 billion across the 91-day, 182-day and 364-day instruments, but demand was sharply skewed toward the long end.
Shorter-term bills recorded weaker interest, with the 91-day and 182-day instruments undersubscribed at N98.71 billion and N66.58 billion, respectively, against N100 billion offers each.
In contrast, the 364-day bill attracted overwhelming demand, drawing N2.73 trillion in subscriptions against a N200 billion offer. The apex bank eventually allotted N394.88 billion.
The demand pattern underscores a strategic shift among investors, who are increasingly favouring longer-dated securities to lock in attractive risk-free returns. The one-year bill offered an effective yield of about 19.66 percent, sustaining its appeal among institutional investors.
“Investor demand remained heavily concentrated on the 364-day bill, as market participants continue to position in longer-tenor government securities,” said Ayodeji Ebo, Managing Director of Optimus by Afrinvest.
He added that the decline in stop rates reflects improved liquidity conditions and sustained institutional demand at the long end, while interest in mid-tenor instruments remains selective.
Analysts say the auction outcome also highlights a deliberate effort by authorities to contain borrowing costs amid easing refinancing pressures.
“At the previous auction, total allotment declined by 25.92 percent to N691.87 billion despite stronger subscriptions, reflecting cost management efforts,” Meristem Securities noted.
The firm added that relatively lower maturities—N579.00 billion compared to N711.16 billion as of 11 March—have reduced immediate refinancing needs, giving the government greater flexibility in issuance.
With liquidity buoyed by inflows into the standing deposit facility and maturing instruments, demand is expected to remain strong at subsequent auctions.
Ahead of the sale, Meristem had projected that Treasury bill maturities would exceed new issuance, creating a net repayment position supportive of liquidity and demand.
This dynamic is already visible in the secondary market, where investors are repricing portfolios in response to the new yield environment.
“The newly issued bills, priced at attractive yields, have triggered a revaluation of outstanding securities, resulting in a general upward adjustment in yields,” the firm said.
Overall, the latest auction points to a subtle but significant shift in Nigeria’s fixed-income market, where robust demand is aligning with a more cost-efficient government borrowing strategy.
As investors continue to lock in high yields at the long end, authorities appear better positioned to guide rates lower in the near term.
