CBN’s N1.15trn Treasury Bill Auction Puts Yields Under Pressure

…Banks, Asset Managers To Demand Higher Pricing At Auction

Analysts have projected a mild upward movement in Nigeria’s treasury bill (T-bill) yields, particularly at the longer end of the curve, as the Central Bank of Nigeria (CBN) conducts a N1.15trn Primary Market Auction (PMA) amid rising government funding pressures.

The auction, which is the CBN’s second T-bill sale for the year and the month, will feature N150bn worth of 91-day bills, N200 billion of 182-day bills, and a dominant N800bn offer for the 364-day tenor.

Market participants expect the size of the offer, combined with elevated borrowing needs, to exert upward pressure on stop rates.

“We expect stop rates to hover around current levels, with a mild upward bias at the long end of the curve, given the frontloading of government borrowings,” said fixed income analyst at Meristem Stockbrokers, Matilda Adefalujo.

She added that the government is likely to maintain relatively attractive rates to sustain strong investor participation.

The outlook for higher yields is reinforced by the Federal Government’s expanding fiscal deficit. The 2026 fiscal year is projected to close with a deficit of N23.85trn, with the government relying heavily on the domestic debt market to finance the bulk of the shortfall.

According to the Nigeria Treasury Bills issuance calendar for the first quarter of 2026, the government plans to raise about N7.55trn within the first three months of the year, signalling an aggressive borrowing stance early in the fiscal cycle.

Analysts say this frontloaded issuance could drive yields higher during the quarter as supply outpaces reinvestment inflows.

Lead economist at CardinalStone, Olaolu Boboye said the firm expects one-year Nigerian Treasury Bill yields to range between 18.0 percent and 20.0 percent in the near term, reflecting the scale of government borrowing and prevailing market dynamics.

“Overall, we advise fund managers to play at the short to mid segment of the curve, especially in the first half of 2026,” he said.

Liquidity conditions also support expectations of firmer yields.

Treasury bills worth N725.19bb are set to mature this week, significantly below the N1.15trn on offer at the auction.

The net issuance gap underscores the government’s funding needs and may prompt investors to demand higher rates, particularly on the one-year paper.
In the secondary market, one-year T-bills are currently trading around 17.50 percent, a level analysts say could encourage investors to push for improved pricing at the primary auction.

Adefalujo noted that this dynamic should place upward pressure on stop rates, especially for the 364-day instrument.

Despite the anticipated rise in yields, market analysts believe sustained demand from banks, asset managers, and other institutional investors will help the government meet its borrowing targets, provided rates remain competitive in the face of tightening liquidity and heightened fiscal demands.