The Central Bank of Nigeria (CBN) is set to auction N1.15 trillion worth of Treasury bills in its second auction for January 2026, amid strong liquidity in the banking system and rising government borrowing needs. The sale will cover the standard maturities of 91 days, 182 days, and 364 days, continuing the apex bank’s strategy of relying on short-term domestic instruments to fund public operations.
Market watchers are paying close attention to the auction as a key signal for short-term interest rates. Mixed inflation trends and sustained monetary tightening have kept investors cautious, with recent data showing N150bn allocated to 91-day bills, N200bn for 182-day bills, and a dominant N800bn for the one-year tenor. Analysts say this structure reflects investors’ preference for longer-dated securities offering higher yields in an uncertain rate environment.
Previous auctions indicate that demand remains strongest at the long end of the curve. For instance, at the first 2026 auction, one-year bills were sold at 18.47 per cent, up from 17.51 per cent, demonstrating investors’ appetite for locking in returns. Despite softer inflation prints recently, market operators expect spot rates to stay firm or even rise, supported by the CBN’s cautious stance on exchange rate stability and tight financial conditions.
Analysts note that the N1.15tn offer comes at a time when maturing bills worth N725.19bn are significantly lower, creating funding pressures. With Nigeria’s 2026 fiscal year projected to carry a N23.85 trillion deficit, the Federal Government is relying heavily on domestic borrowing, including a planned N7.55tn in Treasury bills for the first quarter, which could maintain elevated yields across the curve.
Investors are also mindful of broader market dynamics, including a record N1.03tn in bond maturities falling due on the same day as the auction. Market analysts warn that the reinvestment patterns of these inflows could influence FX demand and put short-term pressure on the naira, reinforcing the importance of the CBN Treasury bills auction in shaping market expectations and investment strategies.
source: punch