Investors‘ search for attractive yields has continued to intensify as the Debt Management Office (DMO) sold Treasury Bills (T-bills) worth N2.86 trillion in February, representing a month-on-month increase of N656.72 billion or 29.79 per cent.

The significant rise also underscored the Federal Government’s increased reliance on short-term borrowing instruments to meet funding needs amid robust market liquidity and strong investor participation.

Reacting to the increased appetite for T-bills, Team Lead, Finance Research Department at InvestingPort, Uwen Olubummo, said rising issuances in February 2026 were driven largely by the Federal Government’s increased reliance on short-term borrowing amid persistent fiscal pressures and widening revenue gaps.

Olubummo explained that the government’s growing funding needs have necessitated a stronger tilt toward domestic debt instruments, particularly TBs, leading to a notable increase in the volume offered to the market during the period.

She noted that the attractiveness of yields on T-bills has also played a critical role in boosting demand.

“In a high-inflation and uncertain macroeconomic environment, investors, including banks, pension fund administrators, and other institutional players, have continued to favour risk-free government securities that offer relatively stable returns and capital preservation.”

According to her, the sustained demand has provided the DMO with the flexibility to expand issuances, as the market continues to absorb higher volumes without significant resistance.

Olubummo stressed that prevailing liquidity conditions within the banking system contributed to the surge in T-bills sales.

She pointed out that excess liquidity driven by maturing instruments and inflows from public sector funds typically pushes financial institutions to channel funds into short-term government securities.

She added that the current tight monetary policy stance, characterised by elevated interest rates, has further enhanced the appeal for the instruments relative to equities and longer-tenor bonds, reinforcing their competitiveness among investors.

However, activity in the bond segment weakened considerably during the period as Federal Government bond issuances declined sharply to N524.28 billion in February, representing a steep contraction of N1.151 trillion or 68.71 per cent, from the N1.675 trillion raised in January.

The decline indicates a cautious approach toward longer-tenor borrowing, despite continued appetite from investors seeking duration and stable returns.

Demand across sovereign instruments remained exceptionally strong, with T-bills and FGN Bonds oversubscribed by 520.38 per cent and 237.4 per cent, respectively.

The high subscription levels showed that investor bids significantly outpaced the amounts on offer, reflecting ample system liquidity and a persistent preference for low-risk government securities in a high-yield environment.

The Central Bank of Nigeria (CBN) suspended its open market operation bill issuances in February, recording zero sales during the month.

This indicates a sharp departure from January 2026, when OMO issuances stood at N11.244 trillion, suggesting a deliberate pause in liquidity sterilisation moves by the monetary authority.

The non-sovereign segment recorded modest growth, supported by subnational debt activity. Two subnational bonds were listed on the FMDQ Exchange, driving a 10.52 per cent increase in total non-sovereign securities, which rose by N232.82 billion to N2.446 trillion. This expansion occurred despite corporate bond maturities totalling N12 billion, indicating that fresh issuances more than offset redemptions during the review period.

On the other hand, the commercial paper market experienced a contraction in activity. Six commercial papers valued at N82.18 billion were quoted in February, reflecting a decline of N80.89 billion or 49.6 per cent, compared with January levels. The agricultural sector emerged as the dominant contributor, accounting for 50 per cent of total issuances, with three of the six papers originating from the sector.

As a result, the total outstanding value of commercial papers fell by 8.42 per cent month-on-month to N527.36 billion, representing a decrease of N48.46 billion. The contraction was driven primarily by maturities amounting to N130.64 billion, which significantly exceeded the volume of new issuances, leading to a net decline in outstanding instruments within the segment.