The Central Bank of Nigeria (CBN) has reduced stop rates on longer-dated Treasury bills at its March 25 auction. This move occurred even as investors injected N2.7 trillion into one-year securities, seeking to secure attractive yields amidst a significant liquidity surplus in the financial system, estimated to be over N8 trillion.

Specifically, the stop rates for the 182-day and 364-day instruments saw a decrease of 20 basis points, settling at 16.42 percent and 16.43 percent, respectively. The rate for the 91-day bill remained unchanged at 15.95 percent. This adjustment reflects easing yield pressures despite robust demand, particularly for longer-term securities.

The government's decision to permit a decline in rates is facilitated by the abundant liquidity, which provides room to manage borrowing costs without accepting higher bids. At the March 25 auction, the CBN had offered a total of N400 billion across the 91-day, 182-day, and 364-day tenors.

Investor demand showed a clear preference for longer maturities. While shorter-tenor bills experienced weaker interest, the 364-day instrument attracted substantial subscriptions, underscoring investor inclination towards longer-dated securities. Ayodeji Ebo, managing director of Optimus by Afrinvest, noted that market participants continue to position in longer-tenor government securities to lock in attractive risk-free returns.

Auction results detailed this uneven demand. The 91-day and 182-day bills were undersubscribed, with N98.71 billion and N66.58 billion in subscriptions against N100 billion offers for each tenor, respectively. In contrast, the 364-day bill garnered N2.73 trillion in subscriptions for its N200 billion offer, with N394.88 billion ultimately allotted. This pattern highlights a strategic shift where investors increasingly bypass shorter maturities to secure higher yields for extended periods.

Analysts suggest this outcome is a deliberate strategy by the government to control borrowing costs, supported by reduced refinancing pressures. Meristem Securities pointed out that lower maturities have eased immediate funding needs, granting the government greater flexibility in its issuance strategy. The firm noted that maturities of N579.00 billion, compared to N711.16 billion as of March 11, 2026, reduced the immediate refinancing requirement.

This environment allowed the government to be selective in allotments, effectively guiding yields lower without diminishing market participation. The persistent liquidity surplus, bolstered by inflows into the standing deposit facility and maturing instruments, is expected to sustain demand at future auctions. This trend is already evident in the secondary market, where investors are adjusting positions in response to new pricing levels.

The latest auction signifies a subtle yet important shift in Nigeria’s fixed-income market. Strong investor demand is aligning with a more cost-conscious borrowing approach by the government. As investors secure high yields at the long end, authorities appear increasingly positioned to guide rates lower, setting the near-term trajectory for Treasury bill yields.