For investors, the first quarter (Q1) of 2026 offers a strategic window to lock in returns before the anticipated “yield slide” later in the year. Here is why T-bills and FGN bonds should be at the top of your portfolio right now.
The 2026 fiscal year has arrived with a N23.85 trillion deficit, and the Federal Government is looking to the domestic market to fund the lion’s share of it. For the everyday investor, this isn’t just a budget headline—it’s a signal that the government is willing to pay a premium for your cash in the first quarter (Q1).
Here is your step-by-step playbook to navigating T-bills and Bonds during this high-stakes quarter.
Why Q1 is the Sweet Spot for T-bills
Under the 2026–2028 MTEF, the government’s borrowing is front-loaded. This means they flood the market with T-bills and Bonds early in the year to get the budget moving.
Analysts expect heavy issuance to drive T-bill rates toward 18 percent in the first quarter.
“Following the YtD decline in yields, we see sufficient legroom for rates to increase in Q1:2026 to around 18 percent levels, driven by the typical front-loaded government issuance in the first quarter. At the same time, the transmission between the policy rate and fixed-income yields (which held reasonably well through 2023 and much of 2024) is fading. Market pricing is now more influenced by supply conditions and liquidity than by changes in the benchmark rate, and this misalignment is likely to persist into 2026. From around April, rates should begin to ease again, tracking the expected direction of monetary policy. However, increased domestic borrowing through higher T-Bill and bond issuance is expected to keep longer-dated higher,” analyst at Meristem said in its 2026 outlook report said.
Lock-in gains before the “Monetary Easing” cycle
While it is projected that the first quarter will be hawkish, the broader outlook for 2026 is one of easing. With a projected 300-basis-point cut in the Monetary Policy Rate (MPR) expected throughout the year, average yields on T-bills and bonds are forecasted to drop significantly, settling at approximately 12.5 percent and 12.9 percent, respectively, by year-end.
Accumulating medium-term bonds (3–7 year maturities) in Q1 allows you to secure high coupons today that will become increasingly valuable as market rates fall.
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In its 2026 outlook report analysts at Afrinvest said, Overall, while 2026 liquidity profile is net supportive, the combination of heavy domestic funding requirements and active liquidity management by the authorities implies that system liquidity is likely to remain structurally constrained. As a result, the scope for aggressive yield compression is expected to remain limited, reinforcing a market environment driven by carry, roll-down, and selective positioning rather than broad-based repricing.
This means that because the government needs to borrow a lot of money due to heavy domestic funding requirement and the CBN is keeping cash tight, interest rates (yields) are unlikely to drop significantly. This means bond prices won’t soar and interest rates won’t plummet. Since rates aren’t dropping fast, you can’t make a “quick buck” from bond prices rising (repricing). Instead, investors must focus on Just sitting on the bond and collecting the high interest, holding a bond as it gets closer to its maturity date to gain value, or being very picky about which specific bonds to buy.
FGN-bonds offer superior ‘Net-of-Tax’ yields.
Tax efficiency has become a critical driver of investor sentiment. Following the introduction of capital gains tax and the existing 10 percent Withholding Tax (WHT) Bonds offer superior ‘Net-of-Tax’ yields.
On short-term government securities, the net returns on T-bills have been dampened. However, long-term FGN Bonds remain WHT-exempt. For institutional and savvy retail investors, shifting toward mid-to-long-dated bonds offers a superior after-tax “carry,” protecting your real returns against inflationary pressures.
Analysts at Cordros said that , with the introduction of the 2026 capital gains tax regime and an existing 10.0 percent withholding tax on short-term instruments, investors are likely to favour FGN bond instruments for their superior after-tax carry. While Treasury bill and interbank rates should ease as funding costs decline and liquidity remains accommodative, the short end is unlikely to attract significant positioning, reinforcing the relative appeal of mid-term maturities.
Net-Yield Comparison (N1,000,000 Investment)
Market reforms to boost investor confidence
The Central Bank of Nigeria’s (CBN) move to take over the operations of the Nigerian fixed-income market is a game-changer. This reform is expected to:
Streamline operations under a unified regulatory framework, enhance transparency and supervisory oversight, and reduce settlement risks, making the market more attractive to both local and foreign portfolio investors (FPIs).
Transition to “Mark-to-Market” transparency
The Securities and Exchange Commission (SEC) has greenlit a phased transition to full Mark-to-Market (MTM) valuation for collective investment schemes. During this transition, the ratio of MTM to amortized cost will shift from 70:30 to 50:50. For investors in mutual funds, this means your portfolio value will more accurately reflect real-time market conditions rather than stale purchase prices. Buying in a high-yield environment like Q1 positions you for capital appreciation as yields fall and bond prices rise.
How to Buy (The Retailer’s Toolkit)
You don’t need billions of Naira to participate. Here is how to enter the market:
The Apps: Platforms like i-invest, Cowrywise, and Stanbic IBTC’s mobile app allow you to buy secondary market T-bills with as little as N100,000.
Primary Market Auctions (PMA): To get the absolute highest rates, the stop rate, participate in the bi-weekly CBN auctions. While the direct minimum is N50 million, many banks allow retail customers to pool their bids starting from N1 million.