The Central Bank of Nigeria (CBN) has raised the stop rate on its 364-day Treasury Bill to 17.59%, surprising investors who expected strong demand to push borrowing costs lower. At Wednesday’s auction, investors submitted a staggering N4.4 trillion in bids across the three Treasury Bill tenors, far exceeding the N700 billion the CBN offered. The move has added a fresh twist to expectations that Nigeria’s fixed-income market may soon enter a period of declining yields.
The strongest demand came from the 364-day Treasury Bill, which attracted N4.19 trillion in subscriptions against N500 billion on offer. Despite the more than eightfold oversubscription, the CBN increased the stop rate by 24 basis points from 17.35% at the previous auction to 17.59%. The apex bank ultimately allotted N1.26 trillion, significantly above the amount initially advertised. By comparison, the 182-day bill attracted N63.97 billion against N100 billion offered, while the 91-day bill received N162.21 billion in bids.
The decision marks a reversal from the CBN’s approach at the July 29 auction, when strong demand was accompanied by a 31-basis-point reduction in the one-year Treasury Bill rate. Wednesday’s outcome suggests that the central bank may still be comfortable maintaining relatively high yields, even with substantial liquidity available in the banking system. Recent liquidity injections, including a reported N2.48 trillion OMO repayment on August 11, have increased the amount of cash available to banks, which would normally create pressure for rates to fall.
The latest auction also comes as the CBN continues its aggressive liquidity-management programme. The bank’s Q3 2026 Treasury Bill issuance programme targets N5.8 trillion in gross issuance between July and September, while OMO operations have already absorbed significant amounts of liquidity from the financial system. In July alone, the CBN reportedly mopped up N7.2 trillion through OMO sales. Against this backdrop, the higher 364-day Treasury Bill rate could indicate that the CBN is using the auction not only to raise funds for government but also as another tool to manage excess liquidity.
For investors, the latest development could keep Treasury Bill yields above 17% for longer than previously expected, particularly on longer-tenor instruments. Market participants had increasingly looked toward the September Monetary Policy Committee meeting for a possible rate cut, which could eventually pull fixed-income yields lower. However, Wednesday’s auction shows that the road to lower rates may not be as straightforward as expected. With demand still exceptionally strong and the CBN continuing to prioritise liquidity management, investors may see the current high-yield environment as an opportunity to lock in attractive returns before monetary policy begins to ease.
source: nairametrics
