CBN trims rates on T-Bills as investors pile N2.7tn

The Central Bank of Nigeria (CBN) reduced stop rates on longer-dated Treasury bills at its 25 March auction, even as investors flooded the market with N2.7 trillion in subscriptions for one-year securities. This move capitalised on a massive liquidity surplus exceeding N8 trillion in the financial system, allowing the government to lower borrowing costs without losing market interest.

Stop rates for the 182-day and 364-day instruments each declined by 20 basis points to 16.42 percent and 16.43 percent, respectively. Meanwhile, the 91-day bill held steady at 15.95 percent, indicating easing yield pressures despite the strong demand for longer-dated debt. The current surplus of cash in the banking system has given authorities more leverage to manage the cost of debt by rejecting higher interest bids.

At the 25 March auction, the CBN offered N400 billion across the 91-day, 182-day, and 364-day tenors, but demand was heavily skewed.

While shorter-term bills experienced weak interest, the 364-day instrument attracted overwhelming subscriptions, highlighting investor preference for longer-dated securities.

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“Investor demand remained heavily concentrated on the 364-day bill, as market participants continue to position in longer-tenor government securities to lock in attractive risk-free returns,” said Ayodeji Ebo, managing director of Optimus by Afrinvest.

Auction results show that the 91-day and 182-day bills were undersubscribed at N98.71 billion and N66.58 billion, respectively, against N100 billion offers for each tenor.

In contrast, the 364-day bill drew N2.73 trillion in subscriptions for a N200 billion offer, with N394.88 billion eventually allotted.

The uneven demand pattern highlights a strategic shift among investors, increasingly bypassing shorter maturities in favour of locking in higher yields for longer periods. The one-year bill offered a return of about 19.66 percent, maintaining its appeal to institutional investors.

“Stop rates on the 182-day and 364-day instruments declined by 20 basis points, suggesting improved liquidity conditions and strong institutional demand at the long end of the curve,” Ebo added.

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“Meanwhile, the 182-day bill continued to see relatively weaker interest, pointing to selective demand across maturities,” he said.

Analysts note that the outcome reflects a deliberate strategy by the government to contain borrowing costs, supported by reduced refinancing pressure.

“At the previous auction, total allotment had declined by 25.92 percent to N691.87 billion despite stronger subscriptions, reflecting efforts to manage borrowing costs,” said Meristem Securities.

The firm observed that lower maturities have eased immediate funding pressures, giving the government more flexibility in its issuance strategy.

“In addition, relatively lower maturities of N579.00 billion, compared to N711.16 billion as of 11 March 2026, reduced the immediate refinancing need,” added Meristem.

This environment enabled the government to be selective in allotments, effectively pushing yields lower without losing market participation.

Estimated at over N8 trillion and buoyed by inflows into the standing deposit facility and maturing instruments, liquidity is expected to sustain demand at future auctions.

Before the auction, Meristem projected that Treasury bill maturities would exceed new issuance, creating a net repayment position that would further support liquidity and demand for government securities.

This outlook is already evident in the secondary market, where investors are adjusting positions in response to new pricing levels.

“This suggests that the newly issued bills, priced at relatively attractive yields, triggered a revaluation of outstanding securities in the secondary market, resulting in a general upward adjustment in yields,” said Meristem.

The latest auction signals a subtle but important shift in Nigeria’s fixed-income market, where strong investor demand aligns with a more cost-conscious borrowing strategy by the government.

As investors move to secure high yields at the long end, authorities appear increasingly positioned to guide rates lower, setting the tone for Treasury bill yields in the near future.