Nigerian treasury bill yield touched its lowest point in over a year at an auction on Wednesday, when the central bank set out to raise N700 billion, stretching further a deceleration trend that began in November after yields peaked in at least nine months.
The long-dated debt sold at a weaker rate of 18.4 per cent, compared to the previous auction when it did so at 20 per cent.
|
|
The lower rate came in tandem with a weaker annual inflation figure seen on Tuesday, when Nigeria’s rebased data set consumer price levels for January 10.3 per cent below the previous month’s figure.
Investors were willing to buy as much as N2.3 trillion worth of the bill, but the government settled for only N704.4 billion at the end of trade.
|
|
|
|---|
However, interest in the 164-day tenor and in the bill maturing in 91 days was tepid, with both maturities underselling what was offered. They also sold at yields lower than similar maturities at the 5 February auction.
Bills valued at N774.1 billion were sold on Wednesday.
“Since the start of the year, primary auction yields have been going lower, lower. If you look at the OMO auction yields as well, it’s been trending lower. So the ground has been set for a lower interest rate environment,” Ayodeji Dawodu, director of CEEMEA fixed income at BancTrust & Co., told PREMIUM TIMES.
OMO (Open Market Operations) bills are similarly issued by the central bank but are targeted at reducing the money in circulation to achieve price stability.
The urgency to lock in elevated interest rates in the market, taking into consideration that the Central Bank of Nigeria would either cut or hold rate on Thursday, fanned bullish sentiment among traders.
Analysts said investor appetite was generally as strong for secondary market debts as for the bills on offer at the auction.
The rebased inflation figure for last month, at 24.5 per cent, has triggered a swing in Nigeria’s real interest rate, an indicator of the extent to which the monetary policy rate is higher than the inflation rate, to positive from negative for the first time in months.
Real interest rate is a major consideration for investors in that it gives a sense of what the actual value of their return on investment. It currently stands at 3 per cent.
The choice by Olayemi Cardoso, the central bank’s governor, and his rate-setting team to hold the rate on Thursday leaves ample time for that decision to run its course over the next few months.
“2024 was the year of fixed income for investors. With the expectation of a relatively lower inflation rate, there is a likelihood that the monetary policy authorities will now be dovish in their outlook,” Matilda Adefalujo, banking analyst at the investment bank Meristem Securities, told PREMIUM TIMES.
READ ALSO: Audit report indicts NNPCL of diverting N514 billion
Miss Adefalujo expects Thursday’s rate announcement to speed up capital inflows from debts into equities in the short term, given the declining yields in the former.
“For the sake of foreign portfolio investors, the monetary authorities will also be careful; the DMO will also be wary of bringing the rate down so much. If they reverse their policy decision and start hiking the rate, it will do Nigeria a disservice,” she added.
Discover more from Premium Times Nigeria
Subscribe to get the latest posts sent to your email.
![Oyo State Governor, Seyi Makinde [PHOTO CREDIT: Seyi Makinde on Facebook]](https://i0.wp.com/media.premiumtimesng.com/wp-content/files/2026/01/599949389_1403320681149117_4444244999938189184_n.jpg?fit=1000%2C667&ssl=1)
