Investors continued to pour money into Nigeria’s one-year Treasury Bills (NTBs) at the latest primary market auction even as the government paid higher rates to borrow.
Results of Wednesday’s Treasury Bills Primary Market Auction showed the 364-day bill closed at a stop rate of 17.70 percent, up from 17.34 percent at the previous auction, translating to a true yield of about 21.51 percent.
This signals that demand for risk-free securities remains resilient despite the Federal Government’s expanding domestic funding programme.
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The instrument attracted subscriptions of N1.86 trillion against an offer of N500 billion, while N935.32 billion was allotted, highlighting sustained investor preference for longer-dated government securities.
“The latest Treasury Bills auction closed with rates rising across the tenors, with the largest increase on the 364-day bill,” said Ayodeji Ebo, an investment professional.
“The one-year tenor remained the major attraction, reflecting continued strong appetite for longer-dated government securities,” Ebo said.
Demand for shorter-dated bills was mixed. The 91-day instrument attracted subscriptions of N146.54 billion against N100 billion offered, with N115.38 billion allotted, indicating continued investor interest at the short end of the curve. In contrast, the 182-day bill remained undersubscribed, receiving only N29.94 billion in bids against the N100 billion on offer, while N13.76 billion was allotted. Stop rates on the two instruments settled at 16.30 percent and 16.50 percent, respectively.
The latest auction extends the recovery in Treasury bill yields after months of moderation. The benchmark one-year stop rate had eased steadily from 18.47 percent in January to 16.15 percent in May before rebounding to 17.34 percent in June and 17.70 percent at the latest auction, signalling renewed upward pressure on short-term government borrowing costs.
The auction also reflects investors’ growing focus on the Federal Government’s domestic funding programme. With the government expected to sustain elevated issuance of Treasury bills and bonds to finance its fiscal deficit, market participants are demanding higher returns before committing funds to sovereign securities, contributing to the gradual repricing across the fixed-income market.
Ahead of the auction, analysts at Meristem Securities projected that stop rates would edge higher as the Federal Government stepped up domestic borrowing while inflationary pressures persisted.
The investment firm disclosed that although liquidity in the banking system remained robust, the larger volume of Treasury bills on offer would require more attractive pricing to draw investor participation.
“We expect stop rates at tomorrow’s Treasury bills auction to edge slightly higher, driven by the sizeable increase in the amount on offer and sustained government borrowing requirements,” Meristem said in its pre-auction note.
“The larger issuance signals an aggressive effort to raise domestic funding while absorbing excess system liquidity.”
The outcome mirrors developments across Nigeria’s broader fixed-income market, where yields on both Treasury bills and Federal Government bonds have moved higher in recent weeks as investors price in increased sovereign borrowing.
Analysts say the strong subscription levels indicate that liquidity remains sufficient to absorb the government’s increased borrowing programme for now, reducing immediate concerns about funding pressures. However, they expect Treasury bill yields to remain elevated in the near term as investors continue to balance abundant liquidity against inflation risks and the prospect of sustained domestic debt issuance.