In a departure from the downward trend observed over the past five treasury auctions, yields on Nigeria’s one-year treasury bills climbed by 0.6%, settling at 19.76% during Wednesday’s primary market auction.
The spike highlights a growing contention between the Debt Management Office (DMO) and market participants over acceptable return levels.
Earlier this year, one-year treasury yields stood at 29%, but had steadily fallen until this recent reversal.
“The tick up in yield is a result of the battle between the Debt Management Office (DMO) and investors on where they are individually comfortable with yields,” said Olaolu Boboye, head of research at CardinalStone, a Lagos-based investment bank. He projected that yields may hover around 19% for the remainder of 2025, with bonds likely to range between 15% and 16%.
While the 364-day bill saw a rise in yield, the shorter-term 91-day and 182-day bills remained unchanged at 15.59% and 16.80%, respectively.
Analysts at Meristem had earlier predicted a slight rise in stop rates across the three maturities, citing a tightening liquidity environment exacerbated by an Open Market Operation (OMO) conducted the day before.
“In tomorrow’s auction, we expect a slight uptick in stop rates across the trio maturities. We note the significant liquidity mop-up, following Tuesday’s Open Market Operation (OMO) auction,” the firm noted.
They also explained that investors were unwilling to offer bids below the prevailing rates in the secondary market.
“The one-year bill is currently trading at 16 per cent in the secondary market, and we envisage that investors may be reluctant to bid at rates lower than this level. Also, this outlook is supported by the government’s net borrowing position of NGN289.74bn at the auction,” they added.
Signs of possible rate easing later in the year have emerged, driven by lower yields and slowing inflation.
At the latest auction, the Central Bank of Nigeria offered N220 billion across its standard three tenors: N60 billion in 91-day, N20 billion in 182-day, and N140 billion in 364-day instruments. However, only N173.24 billion was eventually allotted.
Of this amount, the 364-day paper accounted for the majority of the sales—around 80%—with N139.59 billion sold. The 91-day tenor recorded the weakest demand, with only N18.3 billion allotted from N20.87 billion in subscriptions.
