The Nigerian Treasury Bills (NTB) auction held on May 21, 2025, witnessed an overwhelming investor appetite, attracting a staggering N1.17 trillion in total bids, significantly surpassing the N500 billion offered by the Central Bank of Nigeria (CBN). This surge in demand underscores the continued attractiveness of government securities in an economic landscape characterized by high inflation and a stable interest rate environment. The auction offered bills across three tenors: 91-day, 182-day, and 364-day. The overwhelming majority of bids, nearly 90% totaling over N1.05 trillion, targeted the one-year (364-day) instrument, exceeding the offered amount by over three times. This strong preference for the longer-term security reflects investors’ desire to lock in relatively high yields amidst expectations of potential interest rate reductions later in the year.
The CBN responded to the robust demand by increasing the allotment for the 364-day bill to N503 billion, demonstrating its proactive liquidity management strategy and acknowledging the allure of long-term yields in the prevailing macroeconomic conditions. While the shorter-term bills also attracted considerable interest, with the 91-day bill receiving N72.56 billion in subscriptions against a N50 billion offer and the 182-day bill garnering N46.84 billion against a N100 billion offer, the one-year instrument clearly dominated the auction. This underscores the strategic positioning of investors seeking to capitalize on the current high-yield environment before potential future easing. The CBN allotted N71.67 billion and N41.13 billion for the 91-day and 182-day bills, respectively.
Despite maintaining overall stability in the yield environment, the CBN marginally reduced the stop rate for the 364-day bill by seven basis points to 19.56%, down from 19.63%. The stop rates for the 91-day and 182-day bills remained unchanged at 18.00% and 20.00%, respectively. Even with this slight adjustment, the true yield on the one-year bill remained significantly attractive at 24.31%, compared to 20.40% for the 182-day bill and 18.86% for the 91-day bill. This attractive yield, coupled with the prevailing high inflation rate, further explains the overwhelming demand for the longer-term instrument.
The NTB auction followed closely on the heels of the Monetary Policy Committee (MPC) of the CBN’s decision to maintain the Monetary Policy Rate (MPR) at 27.50% for the second consecutive meeting in 2025. This decision marked a pause in the CBN’s tightening cycle after six rate hikes in 2024, a strategy aimed at curbing inflation and stabilizing the naira. The sustained MPR appears to have instilled greater confidence in the market, providing a more predictable environment for fixed-income investors and contributing to the robust response witnessed in the NTB auction.
Several factors contributed to the strong investor interest in the NTB auction. These include excess liquidity within the banking system, a scarcity of alternative investment options offering comparable returns, and strategic investor positioning in anticipation of potential monetary easing later in the year. With inflation persistently hovering above 23%, Treasury Bills remain one of the few instruments offering positive real returns, attracting investors seeking both safety and yield. Despite the marginal decrease in the 364-day stop rate, the continued oversubscription signals a sustained demand for government debt.
Looking ahead, the NTB market is projected to remain active, driven by the Federal Government’s increasing reliance on domestic borrowing to finance its budget and the CBN’s measured approach to yield management. The interplay of these factors will likely continue to shape investor behavior in the NTB market, with sustained demand expected as long as inflation remains high and alternative investment options remain limited. The government’s borrowing needs and the CBN’s monetary policy decisions will be key determinants of future market dynamics.
