The Nigerian Treasury Bills (NTB) auction held on May 21, 2025, witnessed intense demand from investors, with the 364-day tenor attracting N1.05 trillion in subscriptions, over three times the N350 billion initially offered.
The auction, conducted by the Central Bank of Nigeria (CBN), recorded total subscriptions of N1.17 trillion across the 91-day, 182-day, and 364-day instruments, far surpassing the total offer of N500 billion.
Despite the strong demand, the CBN maintained a relatively tight stance on rates.
It left the stop rates for the 91-day and 182-day papers unchanged at 18.00% and 20.00%,respectively, while trimming the 364-day stop rate marginally by 7 basis points, from 19.63% to 19.56%.
This slight adjustment suggests the apex bank is trying to manage the government’s borrowing costs without dampening the investor appetite for fixed-income instruments.
364-Day instrument draws bulk of liquidity
The bulk of market participation focused on the 364-day bill, where investors staked over N1.05 trillion in bids for the long-tenured paper.
- This accounted for nearly 90% of total subscriptions at the auction, reflecting a strong preference among investors to lock in attractive long-term returns amid ongoing macroeconomic uncertainties. The CBN responded to the overwhelming interest by increasing the allotment for the one-year bill to N503 billion, up from the N350 billion on offer.
- In contrast, interest in shorter tenors remained more modest. The 91-day bill, with an offer of N50 billion, attracted N72.56 billion in subscriptions, resulting in an allotment of N71.67 billion.
- Meanwhile, the 182-day bill received just N46.84 billion in bids against a N100 billion offer, with the CBN allotting N41.13 billion. The relatively subdued demand for shorter maturities may suggest that investors are opting to take advantage of the higher yields offered by longer-term instruments.
- While the stop rates provide a benchmark for returns, the true yields tell a more complete story. The 364-day bill offered a true yield of 24.31%, compared to 20.40% for the 182-day and 18.86% for the 91-day paper. These returns remain especially attractive in the context of Nigeria’s high inflation environment, where inflation has remained above 23%, eroding the value of unhedged cash holdings.
What you should know
The consistently high demand for government securities, particularly in the 364-day space, shows no sign of abating, even with marginal rate reductions
- The auction followed closely after the 300th Monetary Policy Committee (MPC) meeting of the Central Bank, where members voted unanimously to retain the Monetary Policy Rate (MPR) at 27.50%. The move marked the second consecutive hold decision in 2025 after six successive hikes in 2024, signalling a cautious pause in the tightening cycle as the Bank evaluates the effect of its earlier policy actions on inflation, liquidity, and the exchange rate.
- This policy continuity appears to have calmed market nerves and encouraged increased participation in the NTB market, especially from institutional investors and pension fund managers.
With many expecting that rates may soften later in the year, the rush toward longer-tenured instruments like the 364-day bill could be seen as a strategic move to lock in high yields ahead of potential downward rate adjustments.