Nigeria’s latest treasury bills auction on February 19, 2025, attracted significant investor interest, with total subscriptions reaching N2.41 trillion across the three offered tenors. However, this marked a decline from the N3.22 trillion recorded in the February 5 auction, reflecting shifting investor sentiment amid declining inflation and lower yields.
The Central Bank of Nigeria (CBN) increased allotments, particularly for the 364-day bills, while stop rates edged lower. The decline in stop rates signals an adjustment in the fixed-income market, as investors accepted reduced yields following the release of rebased inflation data, which showed a notable drop in Nigeria’s consumer price index.
The highest interest was recorded in the 364-day bills, which had an offer size of N500 billion but received N2.3 trillion in subscriptions. The CBN allotted N704.38 billion at a stop rate of 18.43%, compared to 20% in the prior auction. Bids for this tenor ranged from 16.5% to 25%, demonstrating strong investor competition despite the declining yields.
The decline in stop rates corresponds with Nigeria’s rebased inflation data, which revised the consumer price index downward by 10.3% in January 2025. This shift resulted in a positive real interest rate of 3%, reversing months of negative real returns for investors. The new inflation data has influenced investor expectations, leading to a willingness to accept lower yields.
- Advertisement -
The 91-day bills cleared at 17%, the 182-day bills at 18%, and the 364-day bills at 18.43%, all lower than previous levels. The declining yields align with the CBN’s liquidity management efforts, which aim to reduce borrowing costs while maintaining financial system stability. However, the narrowing spread between bid rates and final stop rates suggests that investors remain cautious, particularly regarding longer-term instruments.
Despite the lower yields, strong investor demand, particularly for the 364-day bills, underscores the continued attractiveness of Nigerian treasury securities. With inflation moderating, market participants anticipate a stable interest rate environment, influencing a shift in portfolio strategies toward equities and alternative asset classes.
