. One-year bills dominate issuance as investors await fresh inflation data

The Central Bank of Nigeria (CBN) is offering N450 billion in Nigerian Treasury Bills (NTBs) at yesterday’s primary market auction, with a full allotment potentially withdrawing N369.16 billion from the financial system as the Federal Government sustains its heavy reliance on short-term domestic borrowing.

The offer, conducted on behalf of the Debt Management Office (DMO), is the second Treasury bill auction of the fourth quarter of 2026 and comes amid strong investor demand for one-year government securities and a gradual decline in their stop rates.

Under the auction circular, N350 billion is earmarked for 364-day bills, while the 91-day and 182-day instruments will receive N50 billion each. Settlement is scheduled for Thursday, October 15 (today).

The 364-day instrument accounts for 77.8 per cent of the total offer, underscoring the government’s preference for the one-year tenor in its fourth-quarter borrowing programme.

The N450 billion offer is the smallest scheduled auction in the fourth-quarter issuance calendar and falls below the N500 billion smallest offers in the third quarter.

However, the amount on offer significantly exceeds the N80.84 billion in Treasury bills scheduled to mature at settlement. If the entire offer is allotted, the government would withdraw approximately N369.16 billion in net liquidity from the financial system.

The actual impact will depend on the final allotment, as the DMO has exceeded advertised offer sizes at previous auctions.

Investor appetite for longer-dated Treasury bills was evident at the quarter’s opening auction on October 7, when the DMO allotted N968.47 billion against an advertised offer of N900 billion.

The 364-day instrument attracted N1.683 trillion in subscriptions against N700 billion offered, representing demand of approximately 2.4 times the advertised amount.

The strong demand coincided with a decline in the one-year stop rate to 15.85 per cent from 15.89 per cent at the preceding auction.

The latest rate was 185 basis points below the third-quarter peak of 17.70 per cent recorded on July 8, indicating a reduction in the yield investors demanded on the one-year instrument over the period.

The 91-day instrument attracted N39.42 billion in subscriptions against N100 billion offered, with N38.55 billion allotted at an unchanged stop rate of 15.50 per cent.
Combined bids for the 91-day and 182-day instruments stood at N86.29 billion against a combined offer of N200 billion.

With N705.73 billion in Treasury bills maturing at the October 7 settlement, the N968.47 billion allotment resulted in a net liquidity withdrawal of N262.74 billion.

The contrasting subscription figures highlight the concentration of investor demand in the one-year instrument, even as yields on the tenor have eased from their third-quarter peak.

The CBN and DMO have scheduled N5.40 trillion in Treasury bill offers for the fourth quarter of 2026, against approximately N5.429 trillion in expected maturities.

The October programme accounts for N2.15 trillion of the planned issuance, spread across three auctions: N900 billion on October 7, N450 billion on October 14 and N800 billion scheduled for October 28.

No auction is scheduled for October 21, when N392.79 billion in Treasury bills is expected to mature. The 364-day instrument dominates the quarterly programme, accounting for N4.10 trillion, or 75.93 per cent, of total planned offers.

The issuance structure reflects the government’s continued emphasis on one-year Treasury bills as a major component of its short-term domestic borrowing programme.

The scale of actual borrowing, however, could exceed the advertised calendar, as demonstrated by the third quarter, when the DMO raised N8.14 trillion against planned offers of N5.80 trillion, with the 364-day instrument accounting for much of the allotment.

Investors are also awaiting the next inflation report from the National Bureau of Statistics, scheduled for Thursday, October 15 (today), as they assess the outlook for yields and the attractiveness of government securities.

The inflation figures could influence market expectations about monetary policy and future Treasury bill rates, although the direction of yields will also depend on liquidity conditions, investor demand and the government’s borrowing requirements.