The Nigerian Treasury Bills (NT-Bills) market experienced a bearish turn last week, driven by investors shifting their attention toward the Primary Market Auction (PMA) in search of higher yields. This movement, coupled with tight liquidity conditions, pushed the average benchmark yield up by 32 basis points to close at 19.21%.
Market Dynamics and Yield Movements
The week’s trading was characterised by widespread sell-offs, particularly at the short and long ends of the yield curve. Notably, the 11-Dec-2025 and 20-Feb-2025 maturities recorded yield increases of 22 basis points and 3 basis points, respectively. This indicates that investors were offloading these bills in anticipation of more favorable rates in the primary market.
In contrast, the mid-section of the curve remained relatively stable, with only mild demand observed for selected mid-tenor instruments. This suggests that while investors were keen on securing higher yields from new issuances, some confidence still lingered around mid-term bills.
Primary Market Auction Sees Strong Demand
A significant highlight of the week was the Primary Market Auction conducted on Wednesday, March 19, 2025. The Debt Management Office (DMO) offered a total of ₦800 billion across the standard tenors — 91-day, 182-day, and 364-day bills.
Investor appetite was overwhelmingly skewed towards the longer-term 364-day bill, which garnered a massive subscription of ₦831.42 billion. This was more than four times the ₦200 billion recorded for the 182-day bill and far ahead of the ₦28.44 billion for the 91-day bill.
The clear preference for the longer-tenor bill reflects investors’ strategy to lock in higher returns amid expectations of continued tight liquidity and rising borrowing costs.
Rising Stop Rates Reflect Higher Borrowing Costs
The auction cleared at significantly higher stop rates across all tenors. The 91-day bill settled at 18.00%, the 182-day bill at 18.50%, and the 364-day bill at 19.94%. These rates indicate a rising cost of borrowing for the government, reflecting investors’ demand for better compensation in an environment where liquidity remains constrained.
The higher stop rates also suggest that market participants are factoring in potential inflationary pressures and further monetary tightening by the Central Bank of Nigeria (CBN).
Outlook for the NT-Bills Market
Looking ahead, the NT-Bills market is likely to remain sensitive to liquidity conditions and monetary policy signals. If liquidity remains tight and inflationary pressures persist, yields may continue to rise as investors demand greater returns to offset risks.
Additionally, the government’s need to finance its budget deficit through domestic borrowing could sustain the high yield environment, particularly for longer-tenor instruments.
For investors, the current environment presents both opportunities and risks — higher yields offer more attractive returns, but rising rates could also signal increased volatility and potential capital losses for those holding existing bills at lower rates.
As market dynamics continue to evolve, close monitoring of CBN’s liquidity interventions and fiscal policy directions will be crucial in determining the NT-Bills market’s trajectory in the coming weeks.
