The Federal Government of Nigeria (FGN), through the Central Bank of Nigeria (CBN), has released the results of its Treasury Bills (T-Bills) auction conducted on March 5, 2025.
The auction, which offered N650 billion, saw strong investor demand, attracting N1.92 trillion in total subscriptions, with the bulk of bids directed at the 364-day instrument.
Despite the heightened demand, the stop rate on the one-year bill fell to 17.82%, the lowest level since September 2024, as the Debt Management Office (DMO) continues to push back against rising borrowing costs.
This comes amid the apparent divergence between the CBN, which wants higher rates to attract foreign investors, and the DMO, which argues that excessive yields increase debt servicing costs.
Breakdown of auction results
The latest auction saw strong participation across the three maturities, but the 364-day bill dominated demand, accounting for 94% of total subscriptions.
- 91-day T-Bill: The CBN offered N70 billion, received N62.57 billion in subscriptions, and allotted N61.52 billion at a stop rate of 17.00%.
- 182-day T-Bill: Offered at N80 billion, it attracted N60.05 billion in subscriptions, with an allotment of N50.95 billion at a stop rate of 17.75%.
- 364-day T-Bill: The most sought-after instrument, with N500 billion on offer, drew N1.80 trillion in bids. The government allotted N717.97 billion, with the stop rate closing at 17.82%, down from 18.50% in February.
In total, the government allotted N830.44 billion, overshooting its initial N650 billion offer, as demand surged.
What you should know
According to an expert, who chose to be anonymous, the declining stop rate on the 364-day bill highlights the ongoing debate between the CBN and DMO over the appropriate pricing of government debt.
The CBN has pushed for higher rates, believing attractive yields are necessary to lure foreign portfolio investors (FPIs) back into Nigeria’s fixed-income market.
The apex bank sees foreign inflows as crucial in stabilizing the naira, which has struggled despite recent policy reforms.
However, the DMO is resisting further rate hikes, arguing that borrowing costs are already unsustainable. The agency responsible for managing the government’s debt portfolio maintains that higher rates will increase debt service obligations, further straining the federal budget.
One key factor driving the high subscription levels is the DMO’s decision to make refunds instead of refinancing maturing debts. Typically, the government would roll over maturing T-Bills by issuing new ones of the same value.
However, sources say that investors who receive refunds are reinvesting their funds into fresh auctions, inflating subscription volumes.
With the DMO planning to remain active in the market to meet budget financing needs, Nairametrics expects demand to remain strong in upcoming auctions, even as rates moderate.
The rebasing of Nigeria’s Consumer Price Index (CPI) has also added a new layer of complexity to interest rate expectations. T
he National Bureau of Statistics (NBS) recently adjusted the CPI base year to 2024, revising the methodology used to calculate inflation.
Under the new framework, inflation for January 2025 was reported at 24.48%, a sharp decline from the 34.80% recorded in December 2024 under the old method. The change has fueled speculation about the
CBN’s next policy move, as some analysts believe, could justify a less aggressive monetary tightening stance.
At its Monetary Policy Committee (MPC) meeting in February 2025, the CBN opted to hold the benchmark interest rate steady at 27.50%, citing the need to assess the impact of the rebased CPI before making further decisions.
However, the committee acknowledged that inflationary pressures remain a concern, particularly with ongoing structural challenges in the economy.
With the CBN maintaining a pause on rate hikes, the outlook for T-Bill yields remains uncertain.
While foreign investors may push for higher returns, the DMO’s preference for lower borrowing costs suggests that rates could remain capped in the near term.
