As the Nigerian naira strengthens, there has been a surge in demand for long-term fixed-income instruments. Investors are increasingly favouring 364-day bonds and Treasury bills due to their stability and attractive yields. This shift highlights investor confidence in the Central Bank of Nigeria’s (CBN) monetary policies. With the naira’s appreciation, investors are positioning themselves to capitalize on the expected benefits of these instruments.
At the official Nigerian Autonomous Foreign Exchange Market (NAFEM) window, the naira closed the week at N1,501.61/$1, marking a significant improvement from above N1,600/$1. The parallel market rate also remained steady at N1,575/$1. The currency’s stability, alongside strong corporate earnings, helped fuel positive trends across the equities and fixed-income markets, with Treasury and Open Market Operation (OMO) bills seeing increased demand.
The CBN’s first Treasury Bills (NTB) Primary Market Auction (PMA) for February 2025 saw overwhelming investor demand, with total subscriptions reaching N3.2 trillion. Despite the high interest in 364-day bills, the 91-day and 182-day bills experienced lower-than-expected subscription levels. This trend demonstrates investors’ preference for long-term fixed-income instruments as they seek to lock in higher returns amid tight liquidity conditions.
In the February auction, 98% of the bids were directed at the 364-day maturity, signaling investor focus on securing long-term yields. The CBN allocated N619.36 billion to these bills, showing a clear strategy to attract liquidity for government financing. With stop rates for the three tenors settling at 18% to 20%, investors are willing to accept premium rates to secure long-term, risk-free government securities.
In 2024, the CBN sold N5.6 trillion in Treasury Bills and OMO Bills to stabilize the naira, with an average yield of 20.5%. These interventions are part of the bank’s broader strategy to manage exchange rate volatility and ensure liquidity in the fixed-income market. As the demand for long-term instruments persists, evolving monetary policies and inflation expectations will continue to shape the future of the fixed-income landscape.
Source: TRIBUNE