Nigerian T-Bill Yields Fall Sharply as Auction Signals Return to Normalcy

Yields on Nigerian Treasury Bills (NT-bills) declined significantly at the latest primary market auction, pointing to a possible stabilisation of the domestic fixed income market after a prolonged period of elevated rates.

At the auction held this week, the benchmark one-year NT-bill yield dropped to 19.4%, well below the peak of 29.21% recorded at the start of the year.

The 364-day tenor saw the sharpest decline to 19.47% from a previous 23.2% while the 91-day and 182-day bills settled at 16.39% and 17.64%, respectively, both easing from earlier highs.

Market analysts attribute the sustained moderation to a combination of improved liquidity, stronger monetary policy transmission and a deliberate effort by the Federal Government to contain domestic borrowing costs.

Despite heavy demand, with subscriptions exceeding ₦1.3 trillion, the Debt Management Office (DMO) allotted only ₦201 billion across all tenors.

The 91-day paper received ₦105 billion in bids against an offer of ₦100 billion, but only ₦59 billion was sold.

The 182-day note attracted ₦44 billion for a ₦20 billion offer, matching its allotment. The 364-day bill was the most oversubscribed, drawing over ₦1.18 trillion, more than ten times the offer size, but only ₦125 billion was allotted.

The restrained issuance aligns with the government’s strategy to manage debt servicing costs amid a widening budget deficit.

Net domestic borrowing in the first half of 2025 stood at around ₦3.4 trillion, driven by NT-bills and Open Market Operations (OMO) totalling ₦13.4 trillion.

Afrinvest analysts project Nigeria’s full-year budget deficit at ₦17.2 trillion, significantly higher than the official ₦14.1 trillion estimate. This leaves a sizeable domestic borrowing gap for the second half of the year, estimated at no less than ₦10 trillion, which could rise if external funding falls short.

CardinalStone Research notes that the Central Bank of Nigeria’s (CBN) monetary policy tools are becoming more effective with better control of money supply and expectations for relative stability in foreign exchange and energy prices.

The firm expects this to support further disinflationary trends in the second half, with a potential policy rate cut of 50–100 basis points if conditions permit.

Afrinvest forecasts that benchmark yields across NT-bills and FGN bonds will average between 19.5% and 22.5% in the second half, lower than levels seen earlier in the year but still attractive enough to sustain investor interest.

The moderation in yields is viewed by market participants as a welcome sign of normalcy returning to Nigeria’s debt market, which has been under pressure from persistent inflation and aggressive monetary tightening.

Analysts, however, caution that the trajectory will depend on the pace of inflation softening, the CBN’s policy stance and the government’s actual funding needs in the months ahead.