The Central Bank of Nigeria cut rates on longer-dated Treasury bills at its March 25 auction, even as investors poured N2.7 trillion into one-year securities to lock in attractive yields amid a liquidity glut exceeding N8 trillion in the financial system.

Stop rates on the 182-day and 364-day instruments fell by 20 basis points to 16.42 per cent and 16.43 per cent, respectively. The 91-day bill held steady at 15.95 per cent, reflecting easing yield pressures despite strong demand at the long end of the curve.

The government’s decision to allow rates to decline comes as liquidity in the financial system remains elevated, giving authorities more room to manage borrowing costs without accepting higher bids.

At the March 25 auction, the CBN offered N400 billion across the 91-day, 182-day, and 364-day tenors, but demand was heavily skewed.

While shorter-tenor bills recorded weak interest, the 364-day instrument attracted overwhelming subscriptions, underscoring investor preference for longer-dated securities.

“Investor demand remained heavily concentrated on the 364-day bill, as market participants continue to position in longer-tenor government securities to lock in attractive risk-free returns,” Ayodeji Ebo, managing director of Optimus by Afrinvest, said.

Auction results show that the 91-day and 182-day bills were undersubscribed at N98.71 billion and N66.58 billion, respectively, against N100 billion offers for each tenor.

In contrast, the 364-day bill drew N2.73 trillion in subscriptions for a N200 billion offer, with N394.88 billion eventually allotted.

The uneven demand pattern highlights a strategic shift among investors, increasingly bypassing shorter maturities in favour of locking in higher yields for longer periods. The one-year bill offered a return of about 19.66 percent, sustaining its appeal to institutional investors.

“Stop rates on the 182-day and 364-day instruments declined by 20 basis points, suggesting improved liquidity conditions and strong institutional demand at the long end of the curve,” Ebo added.

“Meanwhile, the 182-day bill continued to see relatively weaker interest, pointing to selective demand across maturities,” he said.

Analysts say the outcome reflects a deliberate shift by the government to contain borrowing costs, supported by reduced refinancing pressure.

“At the previous auction, total allotment had declined by 25.92 percent to N691.87 billion despite stronger subscriptions, reflecting efforts to manage borrowing costs,” Meristem Securities said.

The firm noted that lower maturities have eased immediate funding pressures, giving the government more flexibility in its issuance strategy.

“In addition, relatively lower maturities of N579.00 billion, compared to N711.16 billion as of March 11, 2026, reduced the immediate refinancing need,” Meristem added.

This backdrop allowed the government to be selective in allotments, effectively pushing yields lower without sacrificing market participation.

Estimated at over N8 trillion and buoyed by inflows into the standing deposit facility and maturing instruments, liquidity is expected to sustain demand at future auctions.

Before the auction, Meristem had projected that Treasury bill maturities would exceed new issuance, creating a net repayment position that would further support liquidity and demand for government securities.

That outlook is already visible in the secondary market, where investors are adjusting positions in response to new pricing levels.

“This suggests that the newly issued bills, priced at relatively attractive yields, triggered a revaluation of outstanding securities in the secondary market, resulting in a general upward adjustment in yields,” Meristem said.

The latest auction signals a subtle but important shift in Nigeria’s fixed-income market, where strong investor demand is aligning with a more cost-conscious borrowing strategy by the government.

As investors move to secure high yields at the long end, authorities appear increasingly positioned to guide rates lower, setting the tone for Treasury bill yields in the near term.