In a strong show of investor confidence, the Central Bank of Nigeria’s (CBN) May 21, 2025 Treasury Bills (NTB) auction attracted ₦1.17 trillion in total subscriptions, with a staggering ₦1.05 trillion funneled into the 364-day tenor alone—triple the ₦350 billion initially offered. This flood of liquidity, despite a marginal rate cut, underscores a strategic pivot by institutional investors to lock in long-term fixed-income yields amid a high-inflation, rate-sensitive economy.
The 364-day instrument, which ultimately saw ₦503 billion allotted, accounted for nearly 90% of total bids, demonstrating a clear investor preference for longer-duration instruments. The true yield on this paper was 24.31%, outperforming the 20.40% on the 182-day and 18.86% on the 91-day bills. These returns remain highly attractive in the context of Nigeria’s stubbornly high headline inflation, which has hovered above 23% in recent months—eroding real returns on cash and short-duration assets.
What’s Driving the Surge?
- Inflation Hedging: With inflation outpacing returns on many savings and money market instruments, longer-dated NTBs offer a relatively safe and inflation-hedged parking spot for capital.
- MPR Stability: The auction followed the 300th Monetary Policy Committee (MPC) meeting, where the CBN maintained the Monetary Policy Rate (MPR) at 27.5% for a second consecutive time in 2025. This policy pause signals cautious optimism, and institutional investors appear to be interpreting it as a cue to lock in yields now, before any future rate cuts.
- Tactical Yield Maximization: Given the uncertainty surrounding future inflation and exchange rate policy, many fund managers are engaging in duration plays—maximizing returns while rates remain elevated.
Contrast in Demand
While the 364-day tenor drew massive bids, shorter bills saw more modest interest. The 91-day bill, with ₦50 billion on offer, received ₦72.56 billion in subscriptions (₦71.67 billion allotted), while the 182-day bill, despite a ₦100 billion offer, drew only ₦46.84 billion, resulting in a lower allotment of ₦41.13 billion. This trend suggests a broader investor move away from short-term positioning toward more robust yield capture in longer-term assets.
Outlook
With the market anticipating a potential monetary easing cycle later in 2025, this aggressive demand for the 364-day NTB could be a strategic preemptive play. If the CBN begins rate cuts in the second half of the year, current high-yield purchases will look prescient.
In an era of macroeconomic volatility, Nigeria’s fixed-income market remains a beacon for yield-hungry investors—especially those betting smartly on duration.
