Nigerian Treasury Bills rally as excess liquidity fuels demand

The average yield on Nigerian Treasury bills declined by 12 basis points (bps) in the secondary market as investors continued to show interest in naira assets. Sentiment was strongly bullish, reflecting excess liquidity level in the financial system while the market anticipates Q4 auctions to start coming on board. According to analysts at Cowry Asset Limited, investors crowded into short, mid, and long tenors, pushing average market yields lower by 12 bps week-on-week to 17.93%. With the monetary policy easing that started in September, the market expects the Central Bank of Nigeria (CBN) to reprice on Treasury bills offerings.
Yields have been nosediving on the back of excess liquidity, which peaked at N7.1 trillion last week, and a series of rate adjustments on naira assets – spurred by disinflation and a firmer naira. In their commentary notes, fixed income market analysts said the movement suggests that investors are actively positioning around liquidity-driven opportunities, with demand spilling across the entire curve. Traders reported there was interest in select maturities after initial sell-offs on the 03-Sep-2026 paper, which pushed the naira asset yield upward by +18 bps. By midweek, sentiment shifted sharply bullish on the back of robust system liquidity, as long-dated papers such as the 03-Sep-2026 and 17-Sep-2026 closed at 15.80% and 15.35%, respectively, while the 07-Jul OMO remained actively traded. Declining yields validate the broad appetite for fixed-income assets in a liquid market environment. The Central Bank of Nigeria’s latest OMO auction sparked a flood of demand Friday, with total subscriptions hitting a massive N3.32 trillion. Yet, in a clear signal of caution, the CBN allotted just N98 billion, lower than N600 billion on offer despite the system being awash with liquidity.
The OMO bills with 88-day maturity was left untouched, while the 102-day and 123-day maturities cleared marginally higher at 20.49% and 20.61%, respectively. The conservative allotment reinforced the Bank’s preference to mop up excess liquidity without overextending issuance. On Friday, minimal buy-side interest trickled into select papers, with light trades observed on the 16-Dec, 3-Mar, and 2-Jun bills. With liquidity still running strong, investors appear to be holding back for further cues from the apex bank’s short-term liquidity management strategy.