The Debt Management Office (DMO) has rejected a significant proportion of investors’ bids for higher yields at Nigeria’s Treasury bills auction, allotting N269.06 billion against N450 billion offered as pressure on government borrowing costs begins to build.
The auction, conducted by the Central Bank of Nigeria (CBN) on behalf of the Federal Government on October 14, attracted N1.03 trillion in subscriptions, down 42 percent from N1.77 trillion recorded at the previous auction on October 7, according to the Financial Markets Dealers Association (FMDA).
In its post-auction analysis, FMDA said the DMO demonstrated strong price discipline, allotting only N269.06 billion despite investor demand exceeding the amount offered.
The decision reflects the government’s resistance to accepting significantly higher borrowing costs, particularly on the 364-day Treasury bill, where investors submitted bids at yields as high as 18.18 percent.
The one-year instrument attracted N982.21 billion in subscriptions against an offer of N350 billion. Despite a bid-to-cover ratio of 2.81 times, the DMO allotted only N220 billion, rejecting about 78 percent of bids for the tenor.
The stop rate on the 364-day bill increased by five basis points to 15.90 percent, marking its first rise since August.
FMDA said the adjustment suggests that the DMO is resisting upward pressure on rates by rejecting higher bids rather than raising its borrowing cost.
The development marks a pause in the decline in primary-market yields that followed the CBN’s monetary policy rate cut, as investors reassess the returns available on government securities.
At the shorter end of the market, demand remained below the amounts offered. The 91-day Treasury bill attracted N19.91 billion in subscriptions against N50 billion offered, while the 182-day instrument recorded N30.10 billion in bids against the same offer size.
The DMO allotted N19.52 billion and N29.54 billion on the 91-day and 182-day bills, respectively, maintaining their stop rates at 15.50 percent and 15.80 percent.
The lower overall allotment came as yields in the secondary market moved higher. FMDA reported that the average Treasury bill yield rose to 17.86 percent on October 13 from 17.64 percent on October 7.
The 12-month benchmark yield increased by 61 basis points to 18.38 percent, while the one-month yield climbed by 94 basis points to 17.75 percent. The nine-month yield rose by 15 basis points to 18.23 percent.
According to FMDA, the increase in secondary-market yields, despite stronger banking-system liquidity, “suggests that investors are seeking higher returns following the sharp repricing that trailed the MPR cut.”
System liquidity rose to N6.30 trillion from N3.71 trillion at the close of the previous week, supported largely by N2.41 trillion in open market operations maturities.
The improvement in liquidity, however, did not prevent a decline in aggregate subscriptions or persuade the DMO to accept the higher yields sought by investors.
The government also reduced its borrowing offer significantly. The October 14 auction offered N450 billion, half the N900 billion made available on October 7. The offer for the 364-day bill fell to N350 billion from N700 billion, while the 91-day and 182-day offers were each reduced to N50 billion from N100 billion.
FMDA said the lower offer and allotment “suggest that the government is moderating its borrowing pace to avoid pushing rates higher.”
The latest auction therefore highlights the tension between the government’s efforts to contain domestic borrowing costs and investors’ demand for higher returns in a market adjusting to changing monetary conditions.
Although the five-basis-point increase in the one-year stop rate provides a modest upward adjustment, the rejection of a large share of bids indicates that the DMO is unwilling to fully accommodate investors’ pricing expectations.
Future auctions will help determine whether the increase in the 364-day stop rate is a limited adjustment or the start of a broader reversal in the downward trend in Treasury bill yields.
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Chinwe Michael is a Nigerian business journalist and media professional with over 4 years of experience covering companies, financial markets, banking, fintech, economic policy, financial inclusion, and corporate affairs. She currently leads the Companies & Markets desk at BusinessDay, where she drives coverage of Nigeria’s corporate and capital markets, translates complex financial data into accessible stories, and mentors younger journalists. Prior to that, she was the head of the financial inclusion/fintech desk. With a background in banking and finance and extensive experience in media and communications, Michael has developed expertise in financial journalism, economic analysis, investigative reporting and market intelligence. Her work examines how monetary policy, corporate performance, capital flows, technology, and regulatory decisions affect businesses, investors, and households. She was selected from about 3,000 applicants as one of 20 journalists for Cohort 4 of the MTN Media Innovation Programme, gaining exposure to new approaches to journalism, technology, and media innovation. Her international journalism experience and engagement with professionals across Russia, Dubai, Saudi Arabia, and others in different sectors have further broadened her understanding of global communication and development.
