A massive liquidity glut has sparked a frenzy in the Nigerian Treasury Bill market, prompting investors to aggressively front-load their portfolios as a yield retreat looms. With the financial system awash in cash, market players are grabbing the 20 percent yields now, anticipating that returns will slide significantly later in the year.
The intensity of this demand was on full display during the February 4, 2026, Primary Market Auction (PMA). The auction recorded a total subscription of N4.59 trillion, nearly four times the N1.15 trillion initially offered by the Central Bank of Nigeria (CBN). This is the highest level of participation since December 2024. Consequently, the fierce competition for the one-year bill forced its true yield down to 20.46 percent, a sharp drop from the previous 22.48 percent.
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The market is currently reacting to a massive influx of cash. Nigeria’s financial system is expected to absorb a liquidity boost of roughly N8.61 trillion in February alone, driven by maturing Open Market Operations (OMO), Treasury bills, and bond coupon payments.
According to Olaolu Boboye, lead economist at CardinalStone, this abundance of cash is the primary driver of the current trend. “The downward trend on the one-year treasury bill is a result of the system being awash with cash from maturing bills,” Boboye noted. He projects that as liquidity continues to dictate market direction, the yield on the one-year bill could fall to 17 percent by December.
Analysts at Meristem highlight a shifting dynamic in the market: the traditional link between the Monetary Policy Rate (MPR) and fixed-income yields is fading. Unlike in 2023 and 2024, market pricing is now being driven more by the CBN’s bill supply and system liquidity than by changes in the benchmark interest rate. This misalignment is expected to persist throughout 2026.
The Nigerian Treasury Bill market has seen an increased level of participation amongst players, evident in subscription levels trending above N1 trillion at primary auctions since December 2025.
Ayodeji Ebo, managing director of Optimus by Afrinvest, said that the massive N4.59 trillion subscription reflects tight liquidity management and a strong investor preference for locking in yields above 20 percent while they last.
However minimal, more aggressive cuts in the latter part of the year are projected to pull rates down further.
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“Assessing the impact of a 100bps change in the MPR on yields and applying our expectation of a 300bps (three percent) cut in the MPR in 2026, we estimate that the average yields on Treasury bills and bonds will decline by 680bps from 19.3 percent and as of December 10, settle at c.12.5 percent by the end of 2026,” analysts at Cordros said in its outlook report.
The auction results showed a flight to yield, with investors favouring one-year Tbills instruments despite a slight dip in interest rates for that tenor.
The 364-day bill alone attracted N4.39 trillion in subscriptions, far outpacing its N800 billion offer. The CBN eventually allotted N808.78 billion for this tenor.
While the 182-Day tenor bids totalled N123.41 billion against a N200 billion offer, with N80.61 billion allotted.
The 91-day tenor segment saw subscriptions of N66.05 billion for a N150 billion offer, resulting in an allotment of N63.21 billion.
Conversely, rates for shorter tenors saw marginal increases, with the 91-day and 182-day stop rates rising to 15.84 percent and 16.65 percent, respectively.
Ebo predicts this trend will gradually filter through the broader fixed-income space, influencing the pricing of future Commercial Papers and money market funds.
Read also: T-bills, bonds offer final yield play as rate cuts loom
Ebo said that while the 364-day softened slightly, it continues to deliver the best yield for investors looking to lock in high returns.
“Longer-dated bills still offer the most compelling value in the current rate environment,” he said.
The drop in yields will spill over to the secondary market. The 364-day NTB stop rate declined sharply, triggering a broad-based yield decline across short, mid, and long tenors, with the average benchmark rate falling by 63 basis points last week.