By Emmanuella Opara | October 18th 2026
KEY POINTS
- Investors subscribed N982 billion to 364-day Treasury bills at the October 14 auction, against an offer of N350 billion.
- Experts say expectations of lower interest rates and attractive yields are driving demand for longer-term bills.
- Strong demand could support government borrowing but may intensify competition between public-sector financing and private-sector credit.
MAIN STORY
Investors are showing a stronger preference for one-year Treasury bills as expectations of lower interest rates and the opportunity to secure current yields influence investment decisions, financial experts have said.
Chukwudi Nga, Managing Director and Chief Executive Officer of MorganCapital Securities Ltd, and Dr Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise, said investors could be choosing longer-term instruments to protect their returns against potential declines in yields.
At the October 14 Treasury bills auction, the 364-day instrument attracted subscriptions of about N982 billion against an offer of N350 billion.
The demand followed a similar pattern at the October 7 auction, when subscriptions for the one-year bill reached approximately N1.683 trillion against an offer of N700 billion.
By comparison, the 91-day and 182-day bills attracted subscriptions of N39.42 billion and N46.87 billion, respectively, against offers of N100 billion each at the October 7 auction.
At the October 14 auction, the stop rate on the 364-day bill rose slightly to 15.90 per cent from 15.85 per cent at the previous auction. The rates on the 91-day and 182-day instruments remained at 15.50 per cent and 15.80 per cent, respectively.
Nga said the small difference between the 182-day and 364-day stop rates at the October 7 auction suggested that investors’ preference for the longer tenor was not necessarily driven by a substantially higher return.
He said investors could be willing to commit funds for longer because they expected yields to decline, although future rates would depend on inflation, monetary policy, liquidity and other market conditions.
Yusuf attributed the preference partly to expectations of further monetary easing, attractive yields and the relative safety of government securities.
The Central Bank of Nigeria (CBN) reduced the Monetary Policy Rate from 26.5 per cent to 23 per cent at its September Monetary Policy Committee meeting. Meanwhile, headline inflation fell to 14.63 per cent in September from 15.39 per cent in August, according to the National Bureau of Statistics.
These developments have influenced market expectations about the direction of interest rates, although neither lower inflation nor a previous policy-rate reduction guarantees further cuts or declining Treasury-bill yields.
Nga said the one-year instrument could offer investors greater certainty about nominal returns if they held it until maturity. Investors who repeatedly purchase shorter-term bills, however, face reinvestment risk if yields decline before their next investment.
He cautioned that longer-term bills might not suit investors who require access to their funds before maturity. Although they can sell their holdings in the secondary market, the price received would depend on prevailing market conditions. Rising yields could result in a loss on the sale.
Inflation also affects the real value of returns, meaning that an attractive nominal yield does not necessarily translate into an equivalent increase in purchasing power.
The demand for longer-term Treasury bills also has implications for government borrowing. At the October 7 auction, the government allotted N885 billion in 364-day bills against the initial offer of N700 billion, while the stop rate fell to 15.85 per cent from 15.89 per cent at the preceding auction.
Nga said strong demand could help the government raise substantial funds without necessarily increasing borrowing costs. However, he warned that concentrating borrowing in longer-dated instruments could create refinancing pressure when large amounts mature around the same period.
Yusuf raised concerns about the allocation of financial resources, particularly the ability of businesses to obtain affordable credit when government securities offer attractive returns.
He said investors could favour government instruments over lending to businesses, especially in manufacturing, agriculture and micro, small and medium-sized enterprises, where operating costs and business risks could be substantial.
He cautioned that this preference could limit funds available for productive investment if sustained, while noting that strong Treasury-bill demand alone did not establish that lending to businesses had declined as a direct result.
“The challenge for economic policy is not simply to attract investment into government securities but to improve the allocation of financial resources towards productive economic activities,” Yusuf said.
He added that relative stability in the foreign exchange market could improve the appeal of naira-denominated securities to foreign portfolio investors. However, the benefits would depend on exchange-rate movements and other investment costs, while foreign inflows could reverse when market conditions changed.
Nga said demand for the 364-day bill could remain strong in the near term if investors continued to anticipate lower yields. He noted, however, that demand could shift towards shorter maturities if investors expected rates to rise and wanted to reinvest their funds sooner.
Yusuf said inflation risks, government borrowing and foreign exchange developments would continue to influence investment decisions as monetary conditions evolved.
Both experts advised investors to assess their cash-flow requirements, investment objectives and risk tolerance before choosing between short- and long-term Treasury bills.
THE ISSUES
The preference for one-year Treasury bills reflects investors’ efforts to balance attractive returns against expectations about future interest rates. Locking in a yield for longer may protect investors against falling rates, but it can limit access to funds and expose investors to potential losses if they sell before maturity when market yields have risen.
Strong demand also gives the government an opportunity to raise funds, but sustained preference for public-sector securities could affect how financial resources are distributed across the economy. The extent of any effect on private-sector lending would require separate evidence.
WHAT’S BEING SAID
“The challenge for economic policy is not simply to attract investment into government securities but to improve the allocation of financial resources towards productive economic activities,” Dr Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise, said.
WHAT’S NEXT
Demand for one-year Treasury bills will depend on inflation trends, CBN policy decisions, government borrowing requirements, financial-system liquidity and foreign exchange developments. Investors will also need to weigh the prospect of securing current yields against their liquidity needs and the risks associated with selling before maturity.
BOTTOM LINE
Investors are favouring one-year Treasury bills amid expectations of lower interest rates and continued demand for government securities. While the trend could support government borrowing, its sustainability will depend on changing market conditions and the balance between investment returns, liquidity and financing needs across the economy.
