Treasury Bill Investment Rises By 133% To ₦1.617tn As CBN Holds Rates

The Nigerian fixed-income market witnessed a remarkable surge in Treasury Bills (T-bills) demand in December 2024, as investors capitalized on the high-interest-rate environment.

According to the FMDQ Markets Monthly Report, obtained by THE WHISTLER, the Debt Management Office (DMO) successfully sold T-bills worth ₦1.617tn, reflecting a 133.33 per cent month-on-month (MoM) increase from ₦693.05bn in November 2024.

This sharp rise in T-bill uptake underscores the growing investor appetite for government securities amid the Central Bank of Nigeria’s (CBN) continued monetary tightening to curb inflation.

The CBN had recently increased the Monetary Policy Rate (MPR) by 25 basis points, raising it from 27.25 per cent to 27.50 per cent, a move that has driven up yields on risk-free instruments such as T-bills.

The surge in demand for T-bills has been driven by institutional and retail investors seeking to leverage the higher yields offered by government-backed securities.

With inflationary pressures persisting, the CBN’s hawkish stance on interest rates has made fixed-income investments increasingly attractive.

T-bills, in particular, have benefited from the elevated MPR, as investors prioritize safe and high-yielding instruments. The oversubscription rate for T-bills at DMO auctions stood at 245.60 per cent, demonstrating strong investor confidence in these securities.

The effect of high interest rates has been felt across other segments of the government securities market. In contrast to the spike in T-bill sales, the value of Federal Government of Nigeria (FGN) Bonds sold in December declined by 39 per cent, with the DMO raising ₦211.14bn, compared to ₦346.16bn in November.

Despite the decline, investor interest in sovereign securities remained robust, as the bond auctions recorded an oversubscription rate of 132.35 per cent.

Meanwhile, the CBN intensified its liquidity mop-up operations, selling Open Market Operation (OMO) Bills worth ₦2.832tn, a staggering 212.95 per cent increase from ₦905.23bn in November. This highlights the central bank’s aggressive efforts to manage excess liquidity in the financial system.

In addition to sovereign securities, corporate debt activities also saw notable movements. A ₦5.82bn corporate bond was listed on the FMDQ Exchange in December, pushing the total value of outstanding non-sovereign bonds to ₦2.246trn.

The commercial paper market experienced a significant increase in new issuances, with CPs valued at ₦174.56bn quoted in December—representing a 125.23 per cent MoM rise from ₦77.5bn in November.

However, the outstanding value of CPs declined 3.19 per cent to ₦508.83bn, primarily due to maturities amounting to ₦191.30bn within the period. Major issuers of CPs during the month included firms from the Telecommunications, Financial Services, and Agriculture sectors.

Despite the heightened primary market activity, the secondary market witnessed a downturn in December. The total turnover on the FMDQ Exchange stood at ₦42.15tn, marking a 28.59 per cent MoM decrease but a 17.73 per cent year-on-year (YoY) increase compared to December 2023.

The Foreign Exchange (FX) and Money Market segments dominated trading, accounting for 67.20 per cent of total secondary market activity.

As Nigeria continues to grapple with inflationary pressures and economic uncertainty, T-bills are expected to remain a preferred investment vehicle for both local and foreign investors.

The CBN’s commitment to its restrictive monetary policy stance suggests that yields on government securities will stay elevated, sustaining the strong demand for risk-free instruments.

With inflation concerns persisting and interest rates remaining high, market participants will closely monitor further policy actions by the CBN and the DMO’s issuance strategy for 2025. Investors seeking stability and attractive returns in the fixed-income space are likely to maintain their strong preference for T-bills in the coming months.

Treasury Bill Investment Rises By 133% To ₦1.617tn As CBN Holds Rates is first published on The Whistler Newspaper