CBN offers N450bn Treasury Bills as one-year demand holds

The Central Bank of Nigeria (CBN) is set to offer N450 billion in Nigerian Treasury bills for subscription at its primary market auction on Wednesday, with the one-year instrument accounting for the bulk of the issuance amid competing expectations over yields.

The auction circular shows that the second Treasury bills sale for October will comprise N50 billion in 91-day bills, N50 billion in 182-day bills and N350 billion in 364-day bills.

Market analysts expect demand to remain strong for the one-year instrument as investors seek relatively low-risk naira-denominated assets amid shifting interest rate expectations.

Robust financial system liquidity and banks’ continued search for investment opportunities are also expected to support subscriptions, although the direction of yields remains uncertain amid monetary policy adjustments and developments in the bond market.

Yields in the Treasury bills market have faced downward pressure following the moderation in monetary policy, while easing inflation could provide further room for a decline in short-term borrowing costs.

Nigeria’s headline inflation rate fell marginally to 15.39 per cent in August from 15.43 per cent in July, according to the National Bureau of Statistics. Investors are awaiting the September inflation report, expected to provide further guidance on the outlook for interest rates.

However, analysts at AAG Capital Limited cautioned that recent losses in the bond market could put upward pressure on sovereign borrowing costs, potentially influencing pricing at the Treasury bills auction.

The firm also pointed to the Federal Government’s planned N5.75 trillion bond offers in the fourth quarter of 2026, noting that increased government borrowing could affect yields across the fixed-income market.

In its market commentary, AAG Capital said ample liquidity in the financial system could support speculative funding ahead of the auction, but warned that yields on one-year Treasury bills might need to rise to attract renewed investor interest.

“We are of the opinion that 1Y paper has stabilised at these levels and can only reprice higher for renewed interest and price action,” the firm said.

The auction will test investors’ appetite for short-term government securities against competing signals from easing inflation, monetary policy adjustments and rising sovereign borrowing requirements.

While strong liquidity could sustain demand, the final stop rates will indicate whether investors are willing to maintain current yield levels or require higher returns to absorb the available supply.