Nigerian Treasury bill yields plummeted to their lowest points in 2026 across all maturities after the Central Bank of Nigeria (CBN) implemented a surprising 350-basis-point reduction in its benchmark interest rate, bringing it down to 23%. This significant monetary easing immediately impacted the fixed-income market, leading to a substantial repricing of short-term government debt instruments. The 91-day T-bill saw its stop rate decrease by 80 basis points to 15.50%, the 182-day T-bill declined by 70 basis points to 15.80%, and the 364-day T-bill dropped by 73 basis points to 15.89%.
The Debt Management Office (DMO), in conjunction with the CBN, allotted N497.59 billion in Treasury bills against an initial offer size of N600 billion. This auction, which occurred shortly after the rate cut, attracted massive investor demand, with total subscriptions reaching N4.23 trillion across the three tenors. The 364-day bill alone accounted for approximately 97% of this demand, attracting N4.09 trillion in subscriptions, prompting the DMO to allot N447.07 billion for this tenor, exceeding the advertised N400 billion. The 364-day rate has cumulatively fallen by 146 basis points over four consecutive auctions, from a peak of 17.70% on July 8 to 15.89% at the latest auction.
Analysts had widely anticipated a more modest response or even no change from the CBN, making the 350-basis-point cut to 23% a substantial surprise. This move by the CBN, described as a technical recalibration to align the policy rate with prevailing market conditions, is expected to continue putting downward pressure on short-term fixed-income yields. However, market experts, such as CSL Stockbrokers Limited, anticipate that T-bill rates will likely fall by about 100-200 basis points, less than the full 350 basis points, as market rates had already moved below the previous Monetary Policy Rate (MPR). The lower yields are also expected to support equities by making fixed-income assets relatively less attractive and could reduce borrowing costs for the Nigerian government and corporations.
This aggressive rate cut comes amidst easing inflation, with headline inflation slipping to 15.39% in August from 15.43% in July, and strong second-quarter economic growth. The CBN also cited relative exchange-rate stability and a build-up in external reserves to $55.25 billion as factors contributing to the decision. While the immediate impact is most visible in Treasury bills and Open Market Operations (OMO) bills, the effect on longer-dated bonds is expected to be more gradual, depending on inflation expectations and liquidity conditions. The reduction in interest rates is also predicted to benefit various sectors, including banking (e.g., Zenith Bank, GTCO), cement (Dangote Cement, BUA Cement), consumer goods (BUA Foods, Nestlé), and telecommunications (MTN Nigeria) through lower financing costs and potentially stronger demand.
