Nigeria’s latest treasury bills auction, conducted by the Central Bank of Nigeria (CBN) on February 19, 2025, witnessed 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 overall demand, the CBN increased allotments across the tenors, particularly for the 364-day bills, while stop rates edged lower across all maturities. The drop in stop rates underscores a change in investor sentiment, suggesting that market participants are adjusting their expectations on yields, inflation, and monetary policy outlook. Analysts believe this shift could have broader implications for Nigeria’s fixed-income market.
Register for Tekedia Mini-MBA edition 17 (June 9 – Sept 6, 2025) today for early bird discounts. Do annual for access to Blucera.com.
Tekedia AI in Business Masterclass opens registrations.
Join Tekedia Capital Syndicate and co-invest in great global startups.
Register to become a better CEO or Director with Tekedia CEO & Director Program.
Investor Demand and Auction Breakdown
The auction results showed varying levels of demand across different treasury bill tenors. The 91-day bills had an offer size of N80 billion but attracted subscriptions totaling N62.14 billion, lower than the amount initially offered. The CBN eventually allotted N34.77 billion at a stop rate of 17%, reflecting lower investor demand for short-term securities. Bids for this tenor ranged from 16% to 25%, indicating that investors remained competitive in securing short-term yields.
For the 182-day tenor, the offer size was N120 billion, with total subscriptions amounting to N49.88 billion. The CBN allotted N34.98 billion at a stop rate of 18%, with bid rates spanning from 17.24% to 22.5%, showing relatively tight competition among investors.
The most significant investor activity was recorded in the 364-day bills, which had an offer size of N500 billion but attracted a massive N2.3 trillion in subscriptions. This was, however, a substantial decline from the N3.16 trillion recorded in the February 5 auction. Despite the lower demand, the CBN increased its allotment for this tenor, issuing N704.38 billion, compared to N619.36 billion in the previous auction. The stop rate for the 364-day bills settled at 18.43%, with bid rates ranging from 16.5% to 25%, suggesting intense competition among institutional investors seeking higher returns.
While demand for short-term government securities remained robust, particularly for the 91-day and 182-day tenors, a notable shift was observed in investor strategy. The 91-day bills saw subscriptions rise from N42.37 billion in the previous auction to N62.14 billion, while 182-day bill subscriptions surged from N19.52 billion to N49.88 billion. This increase in demand for shorter tenors reflects a liquidity-driven investment strategy, with investors preferring safer, short-term placements amid evolving macroeconomic conditions.
Conversely, demand for the 364-day bills declined significantly, suggesting a shift in market expectations. The drop in subscriptions from N3.16 trillion to N2.3 trillion indicates that investors may be reassessing inflationary risks, monetary policy direction, and alternative investment opportunities. The CBN’s decision to increase the allotment for this tenor despite weaker demand suggests that the apex bank is attempting to manage market liquidity while maintaining investor confidence in longer-term instruments.
Declining Stop Rates As A Sign of Changing Yield Expectations
One of the most significant takeaways from the auction was the decline in stop rates across all three tenors. Investors appeared willing to accept slightly lower yields, denoting a possible shift in expectations regarding future interest rates and inflation.
The 91-day bills cleared at a stop rate of 17%, down from 18% in the previous auction. The 182-day bills settled at 18%, lower than the 18.5% recorded earlier in the month. The most substantial shift was observed in the 364-day bills, where the stop rate dropped to 18.43% from 20% on February 5.
The lower yields indicate increasing competition among investors, particularly as market liquidity remains strong. The reduction in stop rates may indicate that investors anticipate a more stable interest rate environment, prompting them to lock in returns at the current levels rather than wait for potential future increases. The maturity dates for successful bids are set for May 22, 2025 (91-day tenor), August 21, 2025 (182-day tenor), and February 19, 2026 (364-day tenor), offering investors different durations for liquidity management and strategic investment planning.
What This Means for Nigeria’s Fixed-Income Market
The decline in yields aligns with broader trends in the Nigerian fixed-income market, where rates have begun to show signs of moderation. Analysts suggest that the drop in stop rates could be linked to the CBN’s efforts to manage inflationary pressures, as lower treasury bill rates reduce the government’s borrowing costs while maintaining market liquidity at stable levels.
However, the narrowing spread between bid rates and final stop rates indicates a level of caution among investors, particularly when it comes to longer-duration securities. While high demand for the 364-day bills suggests that investors are still looking for higher returns amid economic uncertainties, the declining level of subscriptions reflects a more cautious approach as investors weigh Nigeria’s broader macroeconomic risks.
Foreign investors, who play a critical role in Nigeria’s fixed-income market, are likely to remain attentive to yield movements. A sustained drop in treasury bill rates could potentially dampen foreign interest in Nigerian debt instruments, as investors might seek more attractive yields in other emerging markets.
CBN’s Liquidity Management Strategy
The CBN’s decision to increase allotments despite lower overall demand is seen as a carefully calibrated liquidity management strategy. The apex bank appears to be balancing the need for liquidity absorption with the goal of keeping yields attractive enough to sustain investor confidence by issuing a larger amount of 364-day bills.
Market analysts believe that future treasury bill auctions could see further moderation in yields, especially if inflation begins to stabilize and liquidity remains abundant. However, if inflationary pressures persist or global interest rates shift significantly, investor demand for higher returns could push yields upward once again.