The Debt Management Office (DMO) has rejected N763bn worth of bids at Nigeria’s latest Treasury bills auction, accepting only N269.06bn from investors who submitted offers totalling N1.032tn, as the government raised its one-year borrowing rate for the first time since August.
The development marks a reversal in the gradual decline in Treasury bills yields following the Central Bank of Nigeria’s September interest rate cut, with the stop rate on the 364-day instrument rising to 15.90 per cent from 15.85 per cent recorded at the October 7 auction.
The auction, conducted by the CBN on behalf of the Federal Government on October 14, saw the DMO accept approximately 26.1 per cent of total subscriptions, despite investor demand exceeding N1tn.
Results released by the CBN and analysed by the Financial Markets Dealers Association showed that the government offered N450bn across the 91-day, 182-day and 364-day instruments, half the N900bn offered at the preceding auction.
However, total allotments stood at N269.06bn, substantially below the advertised offer, suggesting that the government was unwilling to take up the full amount made available to investors at the rates demanded.
The 364-day Treasury bill dominated investor interest, attracting N982.21bn, representing about 95.2 per cent of total subscriptions. Despite the strong demand, the DMO allotted only N220bn for the instrument, equivalent to approximately 22.4 per cent of the bids received and 62.9 per cent of the N350bn offered.
Investors submitted bids at rates ranging from 15.00 per cent to 18.18 per cent, while the government settled at a stop rate of 15.90 per cent.
The shorter-dated instruments recorded considerably lower demand. The 182-day bill attracted N30.10bn in subscriptions against an offer of N50bn, with N29.54bn allotted at an unchanged stop rate of 15.80 per cent.
Similarly, the 91-day instrument received bids worth N19.91bn against the N50bn offered. The DMO allotted N19.52bn at a rate of 15.50 per cent.
Overall subscriptions were approximately 2.29 times the amount offered, up from 1.97 times at the October 7 auction. Nevertheless, the substantial difference between the value of bids received and the amount allotted highlights the government’s selective approach to borrowing.
The auction results did not specify why individual bids were rejected, but the limited allotment, despite considerable investor interest, indicates that the government did not accept all the financing offered at prevailing market rates.
One-year yield reverses downward trend
The increase in the 364-day stop rate represents a break in the declining yield trend recorded over the preceding auctions.
The rate had risen to 17.59 per cent on August 12 before easing to 15.89 per cent at the September 23 auction and further to 15.85 per cent on October 7.
The decline followed the CBN’s decision on September 22 to cut its benchmark interest rate by 350 basis points to 23 per cent, a move that came amid changing monetary conditions and influenced sentiment in the fixed-income market.
At the latest auction, however, the one-year rate edged higher, suggesting that borrowing costs may be responding to renewed pricing pressures even as the government remains cautious about the volume of debt it is willing to raise.
Demand for the 364-day instrument also declined from the previous auction. Investors had submitted N1.683tn in bids for the one-year bill on October 7, compared with N982.21bn at the latest auction, representing a fall of approximately 41.6 per cent.
Despite the reduction, the one-year instrument continued to attract the overwhelming share of subscriptions, reflecting investors’ preference for locking in returns over a longer period rather than investing in shorter-dated securities.
Borrowing restraint amid changing liquidity conditions
The latest auction took place against a backdrop of improving banking system liquidity and rising yields in parts of the secondary Treasury bills market.
During the third quarter of 2026, the CBN allotted N8.14tn in Treasury bills, exceeding its N5.80tn target by 40.3 per cent, underscoring the scale of government securities issuance during the period.
At the October 14 auction, the DMO allotted N269.06bn, compared with N80.84bn in Treasury bills scheduled to mature. Based on these figures, the auction implies a net increase of approximately N188.22bn in outstanding face value.
The relatively modest allotment meant that the government raised substantially less than the N450bn advertised, even though investors submitted bids exceeding N1tn. The outcome points to a balancing act between meeting financing requirements and limiting the cost of borrowing.
A Lagos-based fixed-income analyst, Ismail Adu, said the higher stop rate offered investors a slightly better return on newly purchased Treasury bills but could increase the government’s financing burden if applied to larger borrowing volumes.
“As an investor, I know that the higher one-year stop rate offers a marginally improved return on newly purchased T-bills. For the government, however, accepting higher rates on a larger volume of borrowing could increase financing cost,” Adu said.
The latest auction therefore highlights the competing interests shaping Nigeria’s fixed-income market: investors seeking attractive returns, and the government weighing its funding needs against the cost of servicing domestic debt.