Rising Nigerian T-Bill Yields Signal New Opportunities for Investors Amid Inflation Drop

Investors are seeing a shift in Nigeria’s fixed-income market as Treasury bill (T-Bill) yields rise for the third consecutive auction. The Central Bank of Nigeria (CBN) recently raised the yield on one-year T-Bills to 21.49 percent, up from 19.76 percent in the first August auction. This reverses a downward trend that saw yields fall to 18.96 percent in July from 29.1 percent at the start of the year, reflecting a broader stabilization in the economy.

The increase follows the Debt Management Office’s (DMO) revision of its third-quarter bond issuance calendar, which doubled the offer size from an average of N50 billion to N100 billion. Investors interpreted this as a signal of growing government financing needs, pushing fixed-income rates up by 63 basis points in August. However, actual borrowings via T-Bills and bonds totaled N613.2 billion, down 9.5 percent from July, suggesting that immediate funding pressures may not be as significant as feared.

Market experts say the CBN is strategically boosting long-term T-Bill yields to attract domestic investors while signaling a potential interest rate cut. Nwachukwu Peter, head trader at UBA, explained that the central bank’s recent focus on 84-day Open Market Operations (OMO) bills, combined with higher 365-day T-Bill yields, is designed to entice investors seeking steady returns. At the latest auction, bids totaled over N1 trillion, yet the CBN accepted only N585.25 billion, with 95 percent coming from one-year bills.

The upcoming Monetary Policy Committee (MPC) meeting on September 22–23 is highly anticipated, as declining inflation rates—from 24.50 percent to 21.88 percent—suggest potential rate cuts. Analysts, including Abdulrauf Bello from Cowrywise, caution that despite easing inflation, oil price challenges and foreign portfolio investment flows will influence any policy adjustments. Some experts predict a possible 50–100 basis points cut in November rather than September, balancing inflation trends with macroeconomic stability.

For investors, the rising T-Bill yields present both opportunity and strategy considerations. Secondary market activity is already reflecting unmet demand from the auctions, with newly issued 364-day bills trading around 17.30 percent. Longer-term T-Bills offer more secure returns compared to short-dated OMO bills, which may lose value if interest rates are cut later in the year. Mutual funds and other fixed-income investments are also expected to benefit from the higher yields, creating attractive avenues for risk-conscious investors.

source: business day