CBN hikes Treasury bills rates amid weak demand as investors show stronger appetite for long-term papers despite easing inflation

CBN hikes Treasury bills rates in a surprising move despite expectations of a rate cut following disinflation and exchange rate stability.

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The Central Bank of Nigeria (CBN) raised yields across standard tenors at its latest Treasury bills auction, signalling a tightening stance even as market liquidity remains constrained.

At the primary market auction, the apex bank offered ₦650 billion worth of Treasury bills across 91-day, 182-day, and 364-day maturities.

Total bids amounted to ₦750.91 billion, a softer subscription compared to previous auctions.

Analysts said the modest turnout limited the CBN’s flexibility to lower rates despite easing macroeconomic pressures.

Reflecting cautious investor sentiment, the CBN allotted ₦7.61 billion in 91-day bills at a 15.30% spot rate — up by 30 basis points.

The 182-day paper, worth ₦100 billion, attracted ₦68.53 billion in bids, with an allotment of ₦67.42 billion at 15.50%, marking a 25 basis-point increase.

The strongest demand came from long-term investors, as the 364-day Treasury bill drew ₦674.25 billion, representing over 90% of total bids.

The CBN eventually allotted ₦316.56 billion at 16.14%, up by 37 basis points from 15.77% at the previous auction.

Analysts attributed the CBN’s decision to hike Treasury bills rates to tight liquidity and restrained risk appetite in the money market.

“An overwhelming subscription could have triggered a downward adjustment,” one investment strategist observed.

The move, coming on the heels of a benchmark interest rate cut and sustained disinflation, underscores the apex bank’s cautious balancing of yield attractiveness with inflation management.

For investors, the higher Treasury bills yields present a more rewarding risk-free investment window in the short term, while also hinting at the CBN’s continued vigilance over market liquidity and currency stability.

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With Treasury bills now offering stronger returns, analysts expect increased participation in subsequent auctions, especially if the CBN maintains this strategic tightening stance.