By Daniel Otera
Despite weaker investor demand at the latest Treasury Bills Primary Market Auction, the Central Bank of Nigeria (CBN) managed to exceed its offer amount, underlining the depth of market liquidity and the strong appetite for high-yielding risk-free instruments amid persistent macroeconomic uncertainties.
At the auction held in the first week of May, the CBN raised its total T-Bills offer to N550 billion, representing a 37.5 per cent increase from the N400 billion offered in the previous auction. The offer spanned the 91-day, 182-day, and 364-day tenors. Yet, total subscriptions dropped significantly to N1.01 trillion, down from N1.43 trillion recorded earlier a 29.45 per cent decline in overall demand.
Still, the auction was oversubscribed as total allotments reached N598.33 billion, reflecting an 8.79 per cent increase compared to the prior week’s sale. The development signals that, despite a notable dip in subscription levels, institutional investors remain active participants in Nigeria’s fixed-income space, particularly as economic conditions prompt more cautious portfolio reallocations.
Demand remained heavily skewed toward the 364-day instrument, which attracted N956.88 billion in bids, accounting for a massive 87.99 per cent of total subscriptions.
This sustained preference for longer tenors reflects investor strategies aimed at locking in high yields amid persistent inflationary pressure, with Nigeria’s annual inflation rate rising to 24.23 per cent in March 2025, according to the National Bureau of Statistics.
Despite the increased offer, the CBN held stop rates steady at 18.00 per cent and 18.50 per cent for the 91-day and 182-day papers, respectively. However, the 364-day tenor saw a marginal uptick, closing at 19.63 per cent, compared to 19.62 per cent in the prior auction. This slight increase appears to be a strategic signal to maintain market participation without significantly adjusting the cost of borrowing for the government.
In the aftermath of the auction, the average yield on Treasury bills in the secondary market dipped by 10 basis points, settling at 20.97 per cent from 21.07 per cent a week earlier. The drop is partly attributed to unsuccessful bidders in the primary market channelling demand into the secondary market.
On a granular level, short-dated T-Bills experienced a marginal 4 basis point yield decline, while mid- and long-dated maturities reflected mixed movements. The 6-month, 9-month, and 12-month instruments saw drops of 3 basis points, 48 basis points, and 7 basis points, respectively. These trends point to growing caution among investors and heightened interest in mid-term papers.
Further tightening was evident in the Open Market Operations (OMO) auction conducted within the same week. The CBN offered N500 billion across the 315-day and 329-day tenors. The auction received total subscriptions of N773.74 billion, and the apex bank allotted N756.74 billion a strong signal of market liquidity and sustained interest in high-yield OMO instruments.
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Stop rates for the OMO bills were set at 22.65 per cent and 22.72 per cent, significantly higher than the T-Bills market, underscoring their attractiveness to foreign portfolio investors and institutional players looking for better risk-adjusted returns.
The domestic bond market also mirrored moderate bullish sentiment. Yields on benchmark bonds such as the APR-33s, JUN-35s, and JUL-37s declined by 3 basis points, pushing the average bond yield down to 19.04 per cent from 19.07 per cent in the preceding week. This aligns with market expectations of a near-term pause in monetary policy tightening, especially with the Monetary Policy Rate already at 24.75 per cent, its highest in nearly two decades.
On the global front, Nigeria’s Eurobond market reflected a bullish sentiment, with investors showing renewed confidence in the country’s foreign debt instruments. According to data published by the Debt Management Office (DMO), average yields on Nigeria’s sovereign Eurobonds fell by 18 basis points, settling at 10.12 per cent as of May 7, 2025, compared to 10.30 per cent recorded the previous week. Notable declines were recorded in the NOV-25, MAR-29, and JUN-31 instruments, with yields dropping by 43 basis points, 30 basis points, and 27 basis points respectively. However, the NOV-27 bond bucked the trend, inching up by 3 basis points, indicating selective re-pricing by investors.
The movement suggests improved risk appetite for emerging market debt, as global investors responded to Nigeria’s relatively stable external reserve position estimated at approximately $33.9 billion in late April 2025 and broader macroeconomic recalibration amid global monetary tightening. The full data was contained in the DMO’s official publication on Eurobond closing prices and yields released on May 7, 2025.
The aggressive stance by the CBN through higher OMO and T-Bills offers underscores ongoing efforts to mop up excess liquidity, stabilise the naira, and rein in inflationary pressures. The consistent oversubscription across auctions, even amid falling demand, reflects institutional investors’ confidence in the risk-free yield environment, which continues to outperform other asset classes.
