The yield on one-year treasury bills (T-bills) continued its downward trajectory, falling to 18.86 percent despite the Monetary Policy Committee (MPC) decision to hold rates.
After a period of elevated yields, driven by high inflation and aggressive monetary policy tightening, the consistent decline observed in recent auctions suggests a more stable and predictable market for government securities.
The one-year bill dropped to 18.86 percent at the auction on Wednesday compared to 29.21 percent at the start of the year.
This decline is despite the Monetary Policy Committee (MPC) of the CBN voting to keep the benchmark policy rate unchanged at 27.5 percent on Tuesday.
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“As it stands, inflation seems to be stable and moderating, fixed income yields are falling, yet the MPR is still kept at 27.5 percent, unmoved. Seems the CBN is super worried about inflation,” Kalu Aja, financial expert, said.
Ayodeji Ebo, managing director, Optimus by Afrinvest, also suggested that the MPC might not be confident of current inflation figures.
“Not sure the MPC is convinced of the rebased inflation numbers. Also, they may be trying to ensure the FX stability is sustained,” he said.
In July, Nigeria’s headline inflation dropped for the third consecutive month to 22.22 percent, raising hope for a rate cut soon.
The decision to maintain the policy rate was driven by a combination of persistent domestic inflationary pressures and heightened uncertainty in the global economic environment, both of which continue to pose upside risks to the inflation outlook.
At the auction yesterday, the most significant drop was observed in the 91-day tenor, where the yield moved down to 15.58 percent from the previous 16.32percent.
The 182-day tenor saw its true yield fall to 16.80 percent from the previous 17.64 percent.
For the 365-day bills, the yield decreased to 18.86 percent from 19.94 percent.
Read also: Rate cut uncertainty, tariff wars spark demand for 91-day NT-bills
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 N289.98 billion despite getting subscriptions worth over N673 billion.
In the first half of 2025, net domestic borrowing stood at approximately N3.4 trillion, driven largely by NT-Bills and OMO issuances totalling 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.
At CardinalStone, an investment banking firm, its analysts point out that CBN monetary policy transmission now appears more effective, evidenced by the moderating pace of money supply.
Read also: Liquidity surge drives T-Bills yields downward
“ 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 N50 billion attracted a substantial subscription of N41 billion, but only N13 billion was allotted.
Similarly, the 182-day tenor had an offer of N20 billion, receiving subscriptions of N24 billion with an allotment of N5 billion.
The longest tenor, 364-day, also experienced strong demand, with almost three times the offer at N609 billion, though only N271 billion was allotted.
