MARKET NEWS

BY  Sami Tunji

The Central Bank of Nigeria’s latest Treasury Bills auction held on May 21, 2025, drew total bids worth N1.17tn, highlighting the continued strength of investor appetite for government securities amid high inflation and a stable interest rate environment.

The auction, which offered a total of N500bn across three tenors (91-day, 182-day, and 364-day bills), saw the strongest interest concentrated in the one-year instrument.

According to auction results, investors submitted bids of over N1.05tn for the 364-day bill alone, representing nearly 90 per cent of total subscriptions and more than three times the N350bn offered for that tenor.

In response to the overwhelming demand, the CBN increased the allotment for the 364-day paper to N503bn, highlighting both its liquidity management strategy and the appeal of long-term yields in the current macroeconomic climate.

The 91-day bill attracted N72.56bn in subscriptions against a N50bn offer, with N71.67bn eventually allotted, while the 182-day tenor, which had a N100bn offer, received a lower bid total of N46.84bn and saw an allotment of N41.13bn.

While investor interest was evident across the board, the shorter tenors remained secondary to the one-year instrument, a trend likely due to investors’ preference to lock in relatively high yields amid expectations that rates may soften later in the year.

Although the overall yield environment was largely stable, the CBN adjusted the stop rate on the 364-day bill slightly, lowering it by seven basis points to 19.56 per cent from 19.63 per cent.

The stop rates for the 91-day and 182-day bills were held constant at 18.00 and 20.00 per cent, respectively.

Despite the rate cut, the true yield on the one-year bill remained attractive at 24.31 per cent, compared to 20.40 per cent for the 182-day and 18.86 per cent for the 91-day bill.

The auction result came just days after the Monetary Policy Committee of the Central Bank voted to hold the Monetary Policy Rate at 27.50 per cent for a second consecutive meeting in 2025.

The decision marked a pause in the CBN’s tightening stance after six rate hikes in 2024, a move aimed at curbing inflation and stabilising the naira. The rate hold appears to have boosted market confidence and created a more predictable environment for fixed-income investors.

The strong response to the auction likely reflects a combination of excess liquidity in the banking system, limited alternative investment options, and investor positioning in anticipation of potential monetary easing later in the year.

With inflation still above 23 per cent, the Treasury Bills market remains one of the few instruments offering positive real returns for investors seeking safety and yield. Despite the marginal drop in the 364-day stop rate, the continued oversubscription suggests that demand for government debt remains resilient.

The NTB market is expected to stay active as the Federal Government increasingly leans on domestic borrowing to fund its budget and the CBN maintains a measured approach to yield management.