Investors showed a great deal of interest in Nigeria’s most recent Treasury Bills auction, which took place on February 19, 2025. The total number of subscriptions for the three offered tenors was N2.41 trillion.
This is less than the N3.22 trillion that was raised at the last auction, which took place on February 5, 2025.
The Central Bank of Nigeria (CBN) raised allotments across the tenors, especially for the 364-day bills, despite the decreased demand, while stop rates somewhat decreased.
A change in yield expectations and shifting investor sentiment are indicated by the decrease in stop rates, which may have wider ramifications for the fixed-income market.
A change in yield expectations and shifting investor sentiment are indicated by the decrease in stop rates, which may have wider ramifications for the fixed-income market.
Breakdown of the auction
- According to the auction results, the 91-day tenor garnered subscriptions of N62.14 billion, which was less than the offer amount of N80 billion. In the end, the CBN gave out N34.77 billion at a 17% stop rate. The competitive interest of investors looking for short-term rates was reflected in the bids for this tenor, which varied from 16% to 25%.
- With an offer size of N120 billion, the 182-day tenor generated N49.88 billion in subscriptions, with N34.98 billion allocated at an 18% stop rate. The 182-day bills had a comparatively tighter spread than the shorter tenor, with bid rates ranging from 17.24% to 22.5%.
- The 364-day tenor, which had an offer amount of N500 billion but saw an incredible N2.3 trillion in subscriptions, attracted the most interest. The CBN maintained a stop rate of 18.43% while allocating N704.38 billion. Institutional investors were quite competitive in obtaining long-term government securities, as evidenced by the 16.5% to 25% range of bids for the 364-day bills.
- There was still a strong demand from investors for short-term government securities, especially in the 91-day and 182-day tenors, where subscriptions increased significantly from the last auction. The N62.14 billion in subscriptions for the 91-day bills was far more than the N42.37 billion for the February 5 auction.
- Subscriptions for the 182-day bills increased from N19.52 billion in the previous auction to N49.88 billion in the most recent round, reflecting a similar spike in demand. As macroeconomic conditions change, investors are looking for safer, shorter-term placements, which is reflected in the rise in demand for these shorter tenors.
- The 364-day bills, on the other hand, saw a sharp drop in demand, with subscriptions dropping from N3.16 trillion in the previous auction to N2.3 trillion in the most recent one. The CBN raised its allocation for this tenor despite this decline, releasing N704.38 billion instead of the N619.36 billion from the previous auction.
- This implies that the apex bank balanced its liquidity management approach in an effort to satisfy investor demand. A change in market expectations may be reflected in the decreased demand for 364-day notes as investors consider alternative investment options, monetary policy direction, and inflationary threats.
A decline in stop rates
The drop in stop rates for all three tenors during the most recent auction was one of the most noteworthy results, indicating that investors were prepared to accept somewhat lower yields.
- The 182-day bills closed at 18%, down from 18.5%, and the 91-day bills cleared at a stop rate of 17%, down from 18% in the last auction.
- The biggest change was seen in the 364-day bills, when the stop rate dropped from 20% on February 5 to 18.43%.
- The successful bids will mature on May 22, 2025 (91-day tenor), August 21, 2025 (182-day tenor), and February 19, 2026 (364-day tenor), providing different timeframes for investment strategies and liquidity planning.
What you should know
Increased investor rivalry is reflected in the yield drop, especially given the considerable market liquidity. Additionally, it implies that investors lock in rates, even at marginally lower levels, because they expect a more stable interest rate environment.
- The decline in stop rates is consistent with more general patterns in the Nigerian fixed-income market, where rates have moderated in the face of steady liquidity. Since lower treasury bill rates may cut the cost of borrowing for the government while maintaining manageable levels of liquidity, the yield drop may be related to the CBN’s efforts to control inflationary pressures.
- The closing gap between bid and final stop rates, however, suggests that investors are still being cautious, especially with regard to longer-duration contracts.
The 364-day tenor’s considerable oversubscription reflects investors’ desire for greater rates in light of the need to protect against inflation and economic uncertainty. The strong demand further indicates the allure of Nigerian debt products, which are supported by alluring stop rates that offer investors competitive returns in contrast to other asset classes.
