Nigeria’s latest treasury bills auction, conducted on February 19, 2025, attracted significant investor interest, with total subscriptions reaching N2.41 trillion across the three offered tenors.
However, this represents a decline from the N3.22 trillion recorded in the previous auction held on February 5, 2025.
Despite the lower demand, the Central Bank of Nigeria (CBN) increased allotments across the tenors, particularly for the 364-day bills, while stop rates edged lower.
The decline in stop rates signals changing investor sentiment and a shift in yield expectations, which could have broader implications for the fixed-income market.
Auction breakdown
- The auction results revealed that the 91-day tenor had an offer size of N80 billion but attracted subscriptions totaling N62.14 billion, lower than what was offered. The CBN eventually allotted N34.77 billion at a stop rate of 17%. Bids for this tenor ranged from 16% to 25%, reflecting competitive interest among investors seeking short-term yields.
- The 182-day tenor, with an offer size of N120 billion, garnered N49.88 billion in subscriptions, while N34.98 billion was allotted at a stop rate of 18%. Bid rates for the 182-day bills spanned from 17.24% to 22.5%, showcasing a relatively tighter spread compared to the shorter tenor.
- The most substantial interest was observed in the 364-day tenor, which had an offer size of N500 billion but recorded a staggering N2.3 trillion in subscriptions. The CBN allotted N704.38 billion, maintaining a stop rate of 18.43%. Bids for the 364-day bills were within the range of 16.5% to 25%, suggesting that institutional investors were highly competitive in securing long-term government securities.
- Investor appetite for short-term government securities remained robust, particularly in the 91-day and 182-day tenors, both of which saw a sharp rise in subscriptions compared to the previous auction. The 91-day bills recorded subscriptions of N62.14 billion, significantly higher than the N42.37 billion recorded in the February 5 auction.
- Similarly, the 182-day bills witnessed a surge in demand, with subscriptions rising from N19.52 billion in the previous auction to N49.88 billion in the latest round. The increase in demand for these shorter tenors reflects a liquidity-driven strategy, with investors seeking safer, short-term placements amid evolving macroeconomic conditions.
- In contrast, demand for the 364-day bills declined significantly, with subscriptions falling from N3.16 trillion in the previous auction to N2.3 trillion in the latest auction. Despite this drop, the CBN increased its allotment for this tenor, issuing N704.38 billion, compared to N619.36 billion in the earlier auction.
- This suggests that the apex bank sought to accommodate investor demand while balancing its liquidity management strategy. The lower level of demand for the 364-day bills could indicate a shift in market expectations, with investors weighing inflationary risks, monetary policy direction, and alternative investment opportunities.
Declining stop rates
One of the most notable outcomes of the latest auction was the decline in stop rates across all three tenors, suggesting that investors were willing to accept slightly lower yields.
- The 91-day bills cleared at a stop rate of 17%, compared to 18% in the previous auction, while the 182-day bills settled at 18%, down from 18.5%.
- The most significant shift was observed in the 364-day bills, where the stop rate fell to 18.43% from the 20% recorded on February 5.
- The maturity dates for the successful bids are scheduled for May 22, 2025 (91-day tenor), August 21, 2025 (182-day tenor), and February 19, 2026 (364-day tenor), offering varying durations for liquidity planning and investment strategies.
What you should know
The decline in yields reflects increased competition among investors, particularly as market liquidity remained strong. It also suggests that investors anticipate a more stable interest rate environment, prompting them to lock in rates even at slightly lower levels.
- The downward movement in stop rates aligns with broader trends in the Nigerian fixed-income market, where rates have shown signs of moderation amid stable liquidity conditions. The reduction in yields could be linked to the CBN’s efforts to manage inflationary pressures, as lower treasury bill rates may reduce the cost of government borrowing while keeping liquidity within manageable levels.
- However, the narrowing spread between bid rates and final stop rates indicates that investors remain cautious, particularly regarding longer-duration instruments.
The notable oversubscription in the 364-day tenor indicates investors’ preference for higher yields amid economic uncertainties and the need to hedge against inflation. The high demand also signals the attractiveness of Nigerian debt instruments, bolstered by attractive stop rates that provide investors with viable returns compared to other asset classes.
