The Central Bank of Nigeria has lowered rates on longer-term Treasury bills after a surge in investor demand, highlighting strong liquidity in the financial system and easing pressure on government borrowing costs.
Stop rates on 182-day and 364-day bills decreased marginally at its March 25 auction; the 91-day rate stayed constant. The decision came as investors far outpaced the N2.7 trillion amount offered in the one-year instrument.
Demand was strongly skewed toward longer tenors, with the 364-day invoice drawing the majority of subscriptions, while shorter-dated instruments received little attention. Analysts note that this shows investors are increasingly willing to lock in greater profits over a longer time.
The News Chronicle gathered that excess liquidity in the financial system, believed at over N8 trillion, is driving the great desire for government bonds, hence providing governments more freedom to control borrowing costs without deterring engagement.
Though giving N400 billion over three maturities, the central bank was picky in its distributions—a tactic meant to lower yields while preserving market confidence.
Market observers point out that the trend portends a change in the fixed-income sector as investors reshuffle portfolios and governments use liquidity conditions to lower rates.
With liquidity expected to remain strong, demand for Treasury bills is likely to stay elevated in the near term, shaping pricing across both primary and secondary markets.
