Treasury Bill Subscriptions Hit N4.59 Trillion as Yields Rise
Investor demand for Nigerian Treasury Bills (T-bills) reached a historic peak on February 4, 2026, with total subscriptions skyrocketing to N4.59 trillion during the latest primary market auction conducted by the Central Bank of Nigeria (CBN). This surge in demand represents a significant oversubscription of the N409.9 billion initially offered by the apex bank across the 91-day, 182-day, and 364-day tenors. The aggressive bidding by both institutional and retail investors is largely attributed to the current high-interest-rate environment, as the CBN continues its hawkish monetary policy to stabilize the Naira and moderate headline inflation.
The auction results reveal a particularly strong appetite for the 364-day long-tenor bills, which accounted for the vast majority of the subscriptions. Stop rates for the one-year paper remained elevated, reflecting the market’s expectation of “higher-for-longer” interest rates in the face of persistent price pressures. This liquidity mop-up is a central component of the CBN’s orthodox monetary strategy, designed to reduce the volume of money in circulation and attract foreign portfolio investment (FPI) into the Nigerian financial system.
For the Nigerian economy, the N4.59 trillion subscription volume carries significant implications for domestic debt management and private sector credit. While the high yields are attractive to investors, they also increase the government’s cost of borrowing. In the 2026 fiscal year, Nigeria has earmarked a substantial portion of its revenue for debt servicing, and the rising interest rates on short-term government instruments add to this fiscal burden. Furthermore, the “crowding-out effect” remains a concern for the real sector; as banks and institutional investors find high-yield, risk-free government securities more attractive, the incentive to provide affordable loans to Small and Medium Enterprises (SMEs) and manufacturers may diminish.
From a monetary perspective, the success of this auction signals a return of confidence in the CBN’s ability to manage liquidity through traditional instruments. Following the unification of the exchange rate and the introduction of the Electronic Foreign Exchange Matching System (EFEMS), the apex bank has sought to harmonize interest rates with inflation levels to achieve a “positive real return” for investors. This alignment is critical for curbing the “flight to safety,” where investors previously converted Naira holdings into U.S. dollars to hedge against inflation, thereby exerting downward pressure on the local currency.
Historically, the Nigerian T-bill market has seen fluctuating participation based on the prevailing Monetary Policy Rate (MPR). In 2024 and 2025, the CBN implemented a series of aggressive rate hikes, moving the MPR from 18.75% to over 27% within a 24-month window. This latest N4.59 trillion subscription suggests that the market has reached a point where the yields on government debt are now high enough to compensate for the perceived risks of inflation and currency volatility. Market analysts note that this level of liquidity absorption is essential for the government to finance its N13 trillion budget deficit for 2025 without resorting to “Ways and Means” advances from the central bank.
The impact on the banking sector is also noteworthy. Nigerian commercial banks, which serve as primary dealers in the T-bill market, stand to benefit from the high-interest income generated by these securities. However, this also places pressure on their cost of funds, as they must increase deposit rates to remain competitive and prevent depositors from moving funds directly into government instruments. This competition for liquidity is expected to keep interbank rates elevated in the near term, maintaining a tight monetary stance across the entire financial ecosystem.
Looking ahead, the trajectory of T-bill yields will likely depend on the upcoming National Bureau of Statistics (NBS) inflation report and the subsequent Monetary Policy Committee (MPC) meeting. If inflation begins to show a sustained moderating trend, the CBN may eventually move toward a neutral or dovish stance, leading to a cooling of stop rates. For now, the “yield-chasing” behavior of investors underscores a period of high domestic liquidity, which the federal government is utilizing to bridge its fiscal gaps while simultaneously pursuing its broader goal of macroeconomic stabilization.
