Central Bank of Nigeria cuts one-year borrowing rate as investor demand surges

The Central Bank of Nigeria (CBN) has lowered borrowing costs on its flagship one-year Treasury bill for a second consecutive week, cutting the stop rate to 16.84% amid overwhelming investor demand.

At Wednesday’s primary market auction, total subscriptions reached ₦3.35tn (£1.7bn), far exceeding the central bank’s initial ₦700bn target.

Capitalizing on the strong appetite, the apex bank allotted ₦865.71bn in bills—roughly ₦165.71bn above its original offering.

Heavy demand for long-dated debt

Investor interest was overwhelmingly concentrated on the 364-day instrument, which attracted ₦3.24tn in subscriptions—accounting for 96.7% of all bids received across the auction.

In contrast, shorter-tenor bills saw notably weak demand:

• 91-day bill: ₦76.82bn subscribed against a ₦100bn offer; ₦76.28bn allotted. Stop rate held unchanged at 16.30%.
• 182-day bill: ₦33.51bn subscribed against a ₦100bn offer; ₦27.27bn allotted. Stop rate held unchanged at 16.50%.
• 364-day bill: ₦3.24tn subscribed against a ₦500bn offer; ₦762.17bn allotted. Stop rate cut by 31 basis points to 16.84%.

The extreme concentration saw the one-year bill draw nearly 29 times the combined subscriptions of the two shorter tenors.

Second consecutive rate reduction

Wednesday’s 31-basis-point drop follows a 44-basis-point cut at the 26 August auction, bringing the cumulative yield reduction on the one-year paper to 75 basis points over two weeks.

The 16.84% stop rate represents the lowest yield on the 364-day bill since 3 June, reversing a mid-summer trend where rates climbed to a peak of 17.70% as the central bank aggressively absorbed excess cash from the banking system.

Financial analysts noted that the CBN is increasingly leveraging robust market demand to drive down government borrowing costs while still raising significant capital.

Precursor to monetary policy easing

The sustained rush to lock in longer-term yields reflects growing market expectations that the central bank may soon pivot toward broader monetary easing.

With Treasury bill yields falling and liquidity conditions stabilizing, market watchers view the latest auction results as a strong signal that the CBN’s Monetary Policy Committee may consider cutting its benchmark interest rate at its upcoming meeting later this month.