Nigeria’s one-year treasury bill (T-bill) auction saw a record high subscription of N3.15 trillion on Wednesday as foreign investors and liquid local counterparts locked in high yields.
The yield on the one-year bill dropped to 25.49 percent from 27.87 percent at the auction but it did not stop investors from leveraging the relatively high yields.
Many foreign investors and international banks have regained confidence in Nigeria securities as the naira continues to stabilise, with the forex market becoming more transparent and efficient.
Nigeria’s T-bill auction has witnessed huge demand with subscriptions crossing of over N1 trillion at every auction this year.
Read also: Inflation rebasing drives N2.49trn T-bills oversubscription, expectations of rate cut
‘Buy Nigeria,’ analysts say
J.P. Morgan, in its recent report entitled, ‘Emerging Market Frontier Local Markets Compass,’ stated that the reforms in Nigeria have made its securities more attractive.
“We stay long in Nigeria T-bills, as reform momentum has started to bear fruit,” the report stated.
Similarly, in an investors call with a reputable international bank with large exposure to Africa, senior officials said that the bank’s strategy in 2025 is to ‘buy Nigeria.’
“Sell everything and buy Nigeria, everything,” they said.
Locally, Matilda Adefalujo, fixed-income analysts at Meristem, had projected in an earlier report that stop rates for the offered instruments would likely decline on excess liquidity.
“We anticipate rates to maintain their downward trend, supported by an average system liquidity of N463.64 billion over the past week, which is expected to drive strong demand and put downward pressure on stop rates,” she said.
At this auction, the amount of maturing bills increased significantly to N955.40 billion, a 303 percent surge from the previous auction, reinforcing the demand for reinvestment opportunities.
Also maturities from other instruments such as bonds, treasury bills and OMO bills are estimated to hit N3.5 trillion this month, making it a very liquid month.
Adefalujo said the government’s emphasis on managing borrowing costs could have influenced the CBN to adjust rates downward.
“The higher offer size of N670 billion, which is significantly lower than the volume of maturing bills, NGN955.40bn, could prompt CBN to consider reducing rates on the instruments,” she said.
Read also: Profit-taking, T-bill yields behind NGX’s slow start to 2025
MPC meeting and rebasing
The MPC meeting, which is held bi-monthly, has been postponed to February 17 and 18, three months after the last meeting in November, as authorities buy time for the rebased inflation figures. The rebased numbers will be released any moment from today.
The postponement to February buys the MPC time for the new inflation methodology to kick off in January.
Economists argue that the rebasing will yield an exaggerated GDP growth number, and the CPI rebasing will downplay the inflation rate.
In the new methodology, the proposed base year for inflation computation is 2024. The year was proposed to capture the structural changes driven by the removal of subsidies on FX and PMS.
These factors contributed to an oversubscription of more than six-fold, the N500 billion offered on the one-year T-bills.
The CBN sold only N619.36 billion worth of the N3.15 trillion subscription it got. This is 26 percent higher than the N2.49 trillion subscription seen at the previous auction.
Analysts at CardinalStone believe that CBN is close to activating a rate cut and see a legroom for a cumulative downward rate adjustment of between 100 and 200 basis points in the second half of 2025.
2025 expectations
In 2025, N31.26 trillion liquidity is expected from OMO, NTB, and bond maturities and coupons.
On the debt front, the government will likely borrow about N9.16 trillion from the domestic market.
Considering these factors, CardinalStone projects a moderation in yields later in the year as the CBN is likely to retain some low liquidity tolerance in the context of ensuring rollovers.
The apex bank is also likely to retain lower borrowing compared to 2024, assuming the issuance of N2.0 trillion in dollar-denominated bonds, leaving a balance of N7.16 trillion to be split between NTB and bonds.
“Overall, we expect yields to be mostly stable in H1’25 before moderating in the second half of the year,” it stated.
Read also: One-year T-bills yield dips to 29.21% as analysts project further low in 2025
Minimal interest
The 182-day and 91-day treasury bills saw minimal interest by investors on Wednesday. Only N31.94 billion of the N50 billion 91-day bill was sold. Likewise, of the 182-day bills, only 18.69 billion was sold.
Yields on the 182-day and 91-day bills remained the same for the 10th consecutive auction at 20.39 percent and 18.86 percent respectively.
