…FG allots fewer NT-Bills amidst oversubscription
The latest Nigerian Treasury Bills (NT-bills) primary market auction signals a potential return to normalcy in the country’s yield environment, as evidenced by a notable drop in yields across all tenors. The benchmark one-year bill has dropped to 19.4 percent, levels below 2024 interest rate hikes.
After a period of elevated yields, driven by high inflation and aggressive monetary policy tightening, the consistent decline observed in this auction suggests a more stable and predictable market for government securities.
The one-year bill dropped to 19.4 percent at the auction yesterday compared to 29.21 percent at the start of the year.
At the auction yesterday , the most significant drop was observed in the 364-day tenor, where the yield moved down to 19.47 percent from the previous 23.2 percent.
Read also: Segregated OMO market fuels yield gap with Treasury Bills
The 91-day tenor saw its true yield fall to 16.39 percent from the previous 18.64 percent. For the 182-day bills, the yield decreased to 17.64 percent from 20.21 percent.
The Nigerian treasury bill primary auction saw the Federal Government allot fewer bills across all tenors despite significant oversubscription, a strategic move aimed at cutting borrowing costs.
The federal government, through the Debt Management Company (DMO), sold only N201 billion despite getting subscriptions worth over N1.3 trillion.
In the first half of 2025, net domestic borrowing stood at approximately N3.4 trillion, driven largely by NT-Bills and OMO issuances totaling N13.4 trillion, but offset by significant outflows through coupon payments and liquidity operations.
Analysts at Afrinvest Looking estimate a budget deficit of N17.2 trillion for 2025, far above the official estimate of N14.1 trillion.
“ This leaves the FG with a domestic borrowing gap of at least N10.0 trillion to cover the second half under a base case – and potentially more if external funding underdelivers,” it said.
The investment firm also projects that the second half yield trajectory in H2’2025 will depend on the pace of inflation moderation, CB policy shift, and borrowing intensity.
“ We expect average benchmark yields to trend between 19.5 percent and 22.5 percent across FGN Bonds and NTBs, respectively, slightly easing from H1 peaks,” it said.
Read also: Nigeria’s stock market stumbles in Q1 as investors seek safety in Treasury bills
At CardinalStone, an investment banking firm, its analysts point out that CBN monetary policy transmission now appears more effective, evinced by the moderating pace of money supply.
“ This effective transmission, coupled with the expectation for relative stability in the FX market and benign energy prices, is likely to support further disinflationary pressures in the second half of the year. As such, the CBN may be inclined to cut the policy rate by 50-100bps,” the firm noted in its H2 outlook.
For the 91-day tenor, an offer of N100 billion attracted a substantial subscription of
N105 billion, but only N59 billion was allotted. Similarly, the 182-day tenor had an offer of N20 billion, receiving subscriptions of N44 billion with an allotment of N20 billion.
The longest tenor, 364-day, also experienced strong demand, with over ten times the offer at N1.18 trillion, though only N125 billion was allotted.
