Investor appetite for longer-dated government securities intensified on Wednesday, as demand for the 364-day Nigerian Treasury bill surged to N4.07 trillion, forcing yields sharply lower.
At the primary market auction, the one-year bill cleared at 18.91 percent, down from 20.46 percent at the previous auction and 22.65 percent at the start of the year.
The long tenor attracted subscriptions more than five times its N800 billion offer, with N1.71 trillion eventually allotted. Overall demand across tenors reached N4.2 trillion, slightly below the N4.59 trillion recorded at the previous auction but still reflecting sustained liquidity in the market.
Ayodeji Ebo, managing director of Optimus by Afrinvest, said investor demand was concentrated at the long end of the curve.
“Demand was heavily skewed toward the 364-day tenor. This reflects strong investor appetite to lock in longer-dated risk-free instruments. As a result of the massive demand, the stop rate on the 1-year bill declined significantly, indicating aggressive bidding and potential expectations of gradual yield moderation ahead,” he said.
In contrast, shorter maturities saw softer participation. The 91-day bill recorded subscriptions of N112.01 billion, while the 182-day tenor drew N93.75 billion, both below their respective offer sizes. Rates at the short and mid-segments remained relatively stable. The 91-day bill edged down slightly to 16.46 percent, while the 182-day bill held steady at 18.17 percent.
Liquidity shift toward longer duration
Market analysts say the sharp oversubscription at the long end suggests that institutional investors are positioning ahead of potential yield compression.
“If sustained, this could gradually compress yields across Commercial Papers, fixed deposits, and money market funds,” Ebo said.
Early signs of that trend are already emerging in the commercial paper market. Recently, Dangote Cement became the first company to list commercial paper on the Nigerian Exchange under its N500 billion programme.
The company issued N19.95 billion in Series 1 notes at a 17.50 percent yield for 181 days and N99.92 billion in Series 2 notes at 19 percent for 265 days, both priced below comparable recent primary market Treasury bill yields.
Strategy for investors
According to Ebo, investors may consider a laddering strategy to manage reinvestment risk. However, those with longer-term liquidity could benefit from locking in current one-year rates before further declines materialise.
The latest auction outcome reinforces expectations that yields may continue moderating if liquidity remains elevated and inflation pressures ease, potentially reshaping returns across fixed-income instruments in the coming months.
