The Central Bank of Nigeria rejected about 60% of bids at its midweek auction of 364-day Treasury bills, pricing the securities at a stop rate of 17.66% on Wednesday. According to market sources, the rejection occurred despite strong demand, with total bids exceeding ₦3 trillion, as the CBN sought to manage liquidity and maintain elevated short-term funding costs.
The 364-day Treasury bill was priced at a stop rate of 17.66%, a four basis-point reduction from the 17.70% rate set at the previous auction, according to market sources. This slight cut marked the only rate adjustment among the tenors offered, as the Central Bank of Nigeria (CBN) held the 91-day and 182-day bills steady at 16.30% and 16.50%, respectively. The auction’s stop rates contributed to a steep yield curve, with yields rising progressively from the shortest to the longest maturity.
Despite the strong demand, with total bids exceeding ₦3 trillion, the CBN rejected about 60% of the subscriptions, sources confirmed.
This meant that less than 40% of the nominal demand was accepted, reflecting a continued strategy by the CBN to manage liquidity and influence short-term funding costs through selective bid acceptance. Trading commentary cited by Cordros Capital Limited indicated that the high rejection rate aligned with the central bank’s ongoing approach of under-allotting relative to subscription levels to shape interest rate dynamics.
Following the auction, the 15 July 2027 364-day Treasury bill traded in the secondary market at a bid yield of 17.45% and an offer yield of 17.40%, slightly below the primary market stop rate, according to market analysts. This price movement suggested some post-auction appreciation, consistent with expectations of a bullish run in the secondary market for Nigerian Treasury bills. However, the average yield on Treasury bills remained around 18.41%, indicating that the broader yield curve had not yet fully repriced downward.
Historical auction data show a pattern of the CBN rejecting large portions of bids while gradually lowering rates, particularly on the 364-day tenor. In a previous auction where subscriptions totaled ₦2.41 trillion, the CBN allotted ₦774.13 billion, rejecting the remainder, with about 91% of the allotment going to 364-day bills. At that time, the 364-day stop rate was cut more aggressively from 20.32% to 18.43%. Similarly, in another midweek sale, the 182-day and 364-day stop rates were reduced to 16.62% and 16.63%, respectively, while the CBN again under-allotted relative to bids.
Sources familiar with the auctions noted that the recurring strategy of high bid rejection combined with incremental rate cuts reflects the CBN’s effort to gradually reduce the government’s short-term borrowing costs without disrupting liquidity conditions abruptly. Market commentators have linked these moves to recent declines in Nigeria’s inflation rate, which has given the central bank some room to nudge benchmark money-market rates lower. However, the persistence of double-digit yields near or above 17% to 18% underscores that monetary conditions remain tight in both real and nominal terms.
The CBN’s approach at the latest auction, balancing a marginal reduction in the 364-day stop rate with a significant rejection of bids, appears aimed at managing liquidity while cautiously lowering funding costs. This calibrated adjustment contrasts with earlier more aggressive rate cuts but aligns with a broader pattern observed over recent months. Analysts cited in market reports anticipate that if inflation and macroeconomic conditions remain supportive, future primary auctions could see further modest reductions, particularly on the 1-year tenor.
The auction volume dynamics also highlight the strong investor appetite for risk-free naira instruments despite the high yields. For example, in an auction with about ₦2.03 trillion in bids against an offer of ₦700 billion, the CBN allotted roughly ₦1.06 trillion, with the 1-year stop rate at 17.70%. These subscription-to-offer ratios give the central bank considerable discretion in shaping auction outcomes through bid rejections and rate setting.
The CBN’s regular midweek Treasury bill auctions continue to serve as a key instrument for liquidity management and government financing. The latest auction’s outcomes and pricing reflect ongoing efforts to balance monetary policy objectives amid evolving inflation trends and market conditions, according to debt market analysts and trading sources.
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