One-year T-bills sees N3.15trn subscriptions as investors lock in on high yields

Nigeria’s one-year Treasury bill auction saw a record high subscription of N3.15 trillion as foreign investors and liquid local investors lock in on high yields.

This led to a decline in its yield at the auction on Wednesday, the yield on the one-year bill dropped to 25.49 percent from 27.87 percent at the last auction.

Many foreign investors and international banks have regained confidence in Nigeria securities, since naira’s volatility is gradually being subdued by the transparency and efficiency in the market.

Nigeria’s treasury bill auction has witnessed huge demand with subscriptions crossing of over a trillion at every auction this year

J.P. Morgan in its recent report titled ‘Emerging Market Frontier Local Markets Compass’ stated that the reforms in Nigeria as made its securities more attractive.

“ We stay long Nigeria T-bills, as reform momentum has started to bear fruit,” the report stated

Read also: Inflation rebasing drives N2.49trn T-bills oversubscription, expectations of rate cut

Similarly, In an investors call with a popular International bank with large exposure to Africa it mentioned that its strategy in 2025 is a big ‘buy Nigeria’.

“Sell everything and buy Nigeria everything,” this was mentioned on the call.

Locally, Matilda Adefalujo, fixed-income analysts at Meristem had projected in an earlier report that it anticipates that stop rates for the offered instruments will likely decline on excess liquidity.

“We anticipate rates to maintain their downward trend, supported by an average system liquidity of N463.64 billion over the past week, which is expected to drive strong demand and put downward pressure on stop rates,” she said.

At this auction, the amount of maturing bills increased significantly to N955.40 billion, a 303 percent surge from the previous auction, reinforcing the demand for reinvestment opportunities.

Also maturities from other instruments such as bonds, treasury bills and OMO bills are estimated to hit N3.5 trillion this month, making it a very liquid month.

Adefalujo mentioned that the government’s emphasis on managing borrowing costs could have influenced the CBN to adjust rates downward.

“On the other hand, the higher offer size of N670 billion, which is significantly lower than the volume of maturing bills NGN955.40bn, could prompt CBN to consider reducing rates on the instruments,” she said.

The MPC meeting, which is held bi-monthly has been postponed to February 17 and 18, three months after the last meeting in November, as authorities buy time for the rebased inflation figures.

Read also: One-year T-bills yield dips to 29.21% as analysts project further low in 2025

The postponement to February buys the MPC time for the new inflation methodology to kick off in January.

Economic analysts argue that the GDP rebasing will yield an exaggerated GDP growth number, and the CPI rebasing will downplay the inflation rate

In the new methodology, the proposed base year for inflation computation is 2024. The year was proposed to capture the structural changes driven by the removal of subsidies on FX and PMS.

These factors contributed to an oversubscription of more than six-fold the N500 billion offered on the one-year T-bills.

The CBN sold only N619.36 billion worth of the N3.15 trillion subscription it got. This is 26 percent higher than the N2.49 trillion subscription seen at the last auction.

Analysts at CardinalStone perceive that CBN is close to activating a rate cut and see legroom for a cumulative downward rate adjustment of between 100 —200 basis points in the second half of 2025.

In 2025, N31.26 trillion liquidity is expected from OMO, NTB, and bond maturities and coupons.

On the debt front, the government will likely borrow about N9.16 trillion from the domestic market.

Considering these factors, CardinalStone projects a moderation in yields later in the year as the CBN is likely to retain some low liquidity tolerance from the context of ensuring rollovers, and a lower borrowing compared to 2024 assuming the issuance of N2.0 trillion in dollar-denominated bonds, leaving a balance of N7.16 trillion to be asplit of NTB and bonds

“ Overall, we expect yields to be mostly stable in H1’25 before moderating in the second half of the year,” it stated.

The 182-days and 91-days treasury bills saw minimal interest by investors. Only N31.94 billion of the N50 billion 91-days bill was sold. Likewise the 182-days bill only 18.69 billion was sold.

Yields on the 182-day and 91-day bills remained the same for the tentth consecutive auction at 20.39 percent and 18.86 percent respectively.