Investors maintained an aggressive appetite for Nigeria’s one-year Treasury bills at Wednesday’s primary market auction, allowing the federal government to borrow at a slightly lower rate even as there were no maturing Treasury bills to provide reinvestment liquidity.
Results of the Treasury Bills Primary Market Auction showed the 364-day bill closed at a stop rate of 17.35 percent, down from 17.70 percent at the previous auction, translating to a true yield of about 20.99 percent.
Despite the lower yield, the instrument attracted subscriptions of N3.38 trillion against an offer of N500 billion, while the Central Bank allotted N1.02 trillion, underscoring sustained investor demand for longer-dated sovereign securities.
“The one-year bill continued to dominate investor interest, with subscriptions exceeding N3.3 trillion,” said Ayodeji Ebo, an investment professional.
“The exceptionally strong demand enabled the stop rate to decline by 31 basis points despite the absence of Treasury bill maturities, suggesting improved market liquidity and investors’ willingness to accept slightly lower returns,” Ebo explained
Demand also strengthened across the shorter maturities. The 91-day bill attracted subscriptions of N135.74 billion against N100 billion offered, with N130.72 billion allotted. The 182-day instrument also recorded healthy demand, receiving N104.74 billion in bids against N100 billion on offer, while N99.18 billion was allotted.
Stop rates on both shorter tenors were unchanged at 16.30 percent and 16.50 percent, respectively, indicating that borrowing costs at the short end of the curve remained stable.
The latest auction suggests investors remain comfortable locking funds into longer-dated government securities even as yields begin to moderate. The one-year stop rate had climbed from 16.15 percent in May to 17.70 percent earlier this month before easing to 17.35 percent, reflecting improving funding conditions for the government without significantly reducing the attractiveness of Treasury bills.
The outcome comes despite the absence of Treasury bill maturities during the week, meaning the auction resulted in a net liquidity mop-up of N700 billion. Typically, auctions held without maturing securities require fresh liquidity from investors rather than recycled proceeds, making strong subscription levels a key indicator of market demand.
Ahead of the auction, analysts at Meristem Securities had projected that stop rates would remain broadly stable with a slight downward bias, particularly on the one-year tenor, citing falling secondary market yields and moderating inflation.
The firm pointed out that average Treasury bill yields in the secondary market had eased to 18.26 percent from 18.32 percent, reflecting sustained investor demand. It added that inflation’s moderation to 15.91 percent in June and stable rates at recent bond and Open Market Operations auctions supported expectations that primary market rates would remain largely unchanged.
“We expect clearing rates to remain broadly stable, with a downward bias, particularly on the 364-day tenor,” Meristem said in its pre-auction note.
The investment firm also observed that while the absence of Treasury bill maturities removed reinvestment demand from the market, it simultaneously reduced the government’s immediate refinancing pressure, limiting the need to offer higher rates to attract subscriptions.
The auction outcome reinforces that view. Investors continued to channel funds toward the one-year bill despite accepting a lower return, suggesting liquidity remains ample and confidence in sovereign securities remains firm.
Analysts say the result points to improving funding conditions for the federal government in the domestic debt market. Although the one-year bill still offers an attractive yield of about 21 percent, the lower stop rate indicates investors are increasingly willing to sacrifice part of that return in exchange for the safety and certainty of government securities.
The auction also signals that, for now, robust system liquidity is sufficient to absorb the government’s domestic borrowing program, even in weeks without reinvestment flows from maturing Treasury bills. If inflation continues to moderate and liquidity remains strong, analysts expect Treasury bill yields to remain broadly stable or ease gradually over the coming auctions.