The Central Bank of Nigeria raised the stop rate on its benchmark 364-day Treasury Bill to 17.59% at its Wednesday auction. This decision defied market expectations that overwhelming demand would push borrowing costs lower.
Investors submitted a combined N4.4 trillion in bids across the three-tenor offer against just N700 billion advertised. This rate hike marks a sharp reversal from the previous auction on July 29, when the CBN eased the one-year stop rate by 31 basis points despite subscriptions reaching nearly seven times the offer size.
Liquidity Surge Fails to Dampen Yields
The auction followed a week of unusually heavy liquidity inflows into the banking system. A reported N2.48 trillion OMO repayment settled on August 11 alone, forming part of a broader N5.21 trillion net injection over the preceding week.
The scale of fresh cash sitting with deposit money banks would ordinarily be expected to compress rates as institutions compete to deploy funds. However, the CBN’s decision to hike suggests it is using the auction as an additional sterilisation tool rather than just a funding exercise. In July alone, the CBN mopped up N7.2 trillion through OMO sales, pushing cumulative 2026 sterilisation past N50 trillion.
Breakdown of the Tenor Performance
The 364-day bill saw N500 billion offered, N4.19 trillion subscribed, and N1.26 trillion allotted. The stop rate rose 24 basis points to 17.59% from 17.35% at the previous auction.
The 182-day bill had N100 billion offered, but was undersubscribed, attracting just N63.97 billion in bids (64% of the offer). The CBN allotted N47.48 billion, holding the stop rate flat at 16.50%.
The 91-day bill saw N100 billion offered, N162.21 billion subscribed, and N148.57 billion allotted. The stop rate held steady at 16.30%. Maturities span November 12, 2026, February 11, 2027, and August 12, 2027, for the 91-day, 182-day, and 364-day bills, respectively.
Sterilisation Strategy Ahead of September MPC
The auction is part of the CBN’s Q3 2026 NTB Issuance Programme targeting N5.8 trillion in gross issuance between July and September. This programme is aimed partly at financing the government’s roughly N29.20 trillion fiscal deficit.
The August 12 auction is the second consecutive large-offer auction, alongside July 8 and July 29, where the 364-day bill cleared at a rate above 17%. This keeps the instrument’s yield firmly higher than headline inflation.
At the July 15 auction, the CBN allotted N1.19 trillion after investors bid N2.87 trillion for the 364-day bill, with rates easing 4 basis points. At the July 8 auction, the CBN allotted N1.06 trillion and hiked the one-year rate to 17.70%. By July 29, the CBN allotted N1.25 trillion as subscriptions hit N3.38 trillion, while the stop rate eased 31 basis points.
Analysts expect the first CBN rate cut at the September MPC meeting. They project current yield levels as potentially the last opportunity to lock in returns above 17% on the one-year instrument.
