Apex bank allots N865.71bn at auction as investors overwhelmingly favour the 364-day instrument despite a second consecutive rate reduction…..
The Central Bank of Nigeria has lowered the stop rate on its one-year Treasury Bill to 16.84 per cent, marking the second consecutive reduction in the rate as investors continue to show strong appetite for longer-dated government securities.
At its Treasury Bills primary market auction on Wednesday, September 2, 2026, the CBN allotted N865.71 billion across the three tenors, exceeding the N700 billion initially put up for sale by N165.71 billion.
The auction attracted total subscriptions of about N3.35 trillion, representing roughly 4.8 times the amount offered by the apex bank.
However, the bulk of investor demand was concentrated on the 364-day Treasury Bill, continuing a pattern that has dominated Nigeria’s primary Treasury Bills market for much of 2026.
The 364-day instrument attracted N3.238 trillion in subscriptions against an advertised offer of N500 billion, equivalent to about 6.48 times the amount on offer.
The CBN subsequently allotted N762.17 billion on the one-year bill, exceeding the initial offer by N262.17 billion.
Despite the heavy demand, the stop rate was reduced by 31 basis points to 16.84 per cent from 17.15 per cent recorded at the August 26 auction.
The latest rate is the lowest recorded on the 364-day Treasury Bill since June 3, when the instrument cleared at 16.35 per cent.
Short-Term Bills Struggle For Investor Attention
The strong preference for the one-year bill was sharply reflected in the weak subscription levels recorded on the shorter instruments.
The 91-day Treasury Bill had N100 billion on offer but received only N76.82 billion in subscriptions.
The CBN allotted N76.28 billion, while the stop rate remained unchanged at 16.30 per cent.
The 182-day instrument attracted even less interest.
Against an offer of N100 billion, investors submitted just N33.51 billion in bids, covering only 33.5 per cent of the amount available.
The apex bank allotted N27.27 billion at an unchanged stop rate of 16.50 per cent.
The three securities will mature on December 3, 2026, March 4, 2027, and September 2, 2027, respectively.
The disparity in demand was significant.
The 364-day bill alone accounted for approximately 96.7 per cent of total subscriptions at the auction, attracting nearly 29 times the combined N110.33 billion subscribed for the 91-day and 182-day instruments.
Second Consecutive Rate Cut
Wednesday’s auction extends a recent reversal in the direction of Treasury Bill yields after months of rising rates on the longer end of the curve.
At the August 26 auction, the CBN reduced the stop rate on the 364-day bill by 44 basis points, from 17.59 per cent to 17.15 per cent.
With Wednesday’s additional 31-basis-point reduction, the one-year Treasury Bill rate has now fallen by a cumulative 75 basis points in just two auctions.
The rate has moved from 17.59 per cent to 16.84 per cent despite exceptionally strong demand for the instrument.
That marks a notable shift from the trend witnessed between June and August.
The 364-day Treasury Bill rate stood at 16.35 per cent at the June 3 auction before climbing to 17.34 per cent on June 17.
It rose further to 17.70 per cent at the July 8 auction and remained elevated through much of July and August.
The rate eventually reached 17.59 per cent at the August 12 auction, even as the banking system was experiencing substantial liquidity following a reported N2.48 trillion OMO repayment on August 11.
The latest 16.84 per cent stop rate therefore represents the lowest level for the one-year instrument in nearly three months and could indicate a change in the CBN’s approach to pricing longer-dated government securities.
CBN Uses Strong Demand To Lower Borrowing Cost
The latest auction also presents an unusual combination of strong investor demand and falling borrowing costs.
Ordinarily, intense demand for a government security can provide room for an issuer to accept lower yields. Wednesday’s auction appears to reflect that dynamic, with the CBN taking substantially more money than originally advertised while simultaneously reducing the stop rate.
The 364-day bill remained particularly attractive to investors because its yield was still higher than returns available on the shorter instruments.
The 16.84 per cent stop rate was also slightly above the prevailing secondary-market yield of 16.74 per cent.
The same was not the case for the shorter securities.
The 91-day bill cleared at 16.30 per cent compared with a secondary-market rate of 17.79 per cent, while the 182-day bill cleared at 16.50 per cent against a secondary-market rate of 17.38 per cent.
The difference further highlights the preference investors have shown for the longer tenor in the primary market.
One-Year Bills Continue To Dominate
The 364-day Treasury Bill has maintained its position as the dominant instrument at major NTB auctions since June, with investors repeatedly showing a willingness to commit funds for a full year to secure relatively attractive yields.
The trend has persisted despite fluctuations in the broader liquidity environment.
At the August 12 auction, for instance, the CBN raised the 364-day stop rate to 17.59 per cent even as investors submitted approximately N4.4 trillion in bids against an offer of N700 billion.
The auction also formed part of the apex bank’s broader liquidity-management efforts at a time when the banking system was receiving substantial liquidity from OMO repayments.
The CBN’s sterilisation operations have remained significant throughout the year.
The apex bank reportedly mopped up N7.2 trillion through OMO sales in July alone, taking cumulative OMO sterilisation for 2026 beyond N50 trillion.
The latest Treasury Bills auction suggests that the CBN may now be finding room to reduce the cost of borrowing while still attracting substantial funds from investors.
The latest movement in Treasury Bill yields could also provide an early indication of the direction of monetary policy ahead of the next Monetary Policy Committee meeting.
Earlier expectations that the CBN could begin reducing its benchmark interest rate at its September meeting have gained renewed relevance following the successive declines in the one-year Treasury Bill stop rate.
Wednesday’s auction does not, by itself, confirm a change in the Monetary Policy Committee’s stance.
However, the combination of strong demand, substantial allotment above the advertised amount and a second consecutive reduction in the one-year Treasury Bill rate suggests that the domestic fixed-income market is already adjusting to expectations of a potentially softer interest-rate environment.
For investors, the 16.84 per cent yield on the 364-day instrument remains attractive, particularly compared with the shorter-term securities, even after the latest reduction.
The key question now is whether the decline in Treasury Bill yields will continue ahead of the CBN’s September policy decision and whether the trend will eventually extend beyond the short-term government securities market into the wider interest-rate environment.
