The Central Bank of Nigeria (CBN) is set to conduct its third Treasury Bills (T-Bills) Primary Market Auction (PMA) for March on March 19, 2025.
At this auction, the CBN will offer a total of N800.00bn across three tenors: N100.00bn for 91-day bills, N200.00bn for 182-day bills, and N500.00bn for 364-day bills.
It is important to note that this auction is part of an updated calendar, meaning there will be four auctions this month instead of the usual three.
Outlook on Yields
At the previous PMA on March 12, 2025, the CBN offered N550.00bn, slightly lower than the N650.00bn issued at the March 5 auction. Investor demand continued to moderate, influenced by tight liquidity conditions (N171.05bn as of March 11, 2025) and a reduced volume of maturing bills–-to–offer size (N162.17bn vs N550.00bn, the lowest since the January 22, 2025 auction). As a result, the subscription-to-offer ratio declined to 2.30x from 3.85x at the prior auction.
Total bids stood at N1.27trn, reflecting a 34.11% decline from the N1.92trn recorded at the earlier auction.
Investor preference remained strong for the 364-day bill, which accounted for 94.12% of total bids. Ultimately, the CBN allotted N678.75bn, lower than the year-high of N830.44bn, bringing the bid-to-cover ratio down to 1.96x from 2.51x.
As expected, stop rates on the 91-day bill remained at 17.00%, while the 182-day and 364-day bills saw an increase to 17.79% and 18.39%, up from 17.75% and 17.82%, respectively.
This marks the first uptick in stop rates since the second auction in November 2024, following a period of consistent declines.
At tomorrow’s auction, we anticipate stop rates to follow a similar trend as the previous auction. The 91-day is likely to remain stable, while we expect a further uptick in the 182-day and 364-day tenors as liquidity conditions remain tight, as indicated by elevated interbank rates (OBB: 32.42%, OVN: 32.83% as of March 17, 2025) and constrained system liquidity (N700.29bn).
The absence of maturing inflows due to the revised calendar further exacerbates this liquidity strain. Additionally, the offer size for this auction is the largest since February 2024, suggesting that investors will likely demand higher yields as compensation for the prevailing liquidity challenges.
Since the last auction, the secondary T-Bills market has shown mixed performance, with a bearish bias. Buying interest has been concentrated at the short and long ends of the curve, particularly in the AUG-25 maturity, which saw yields decline by 12bps to 18.06% as of March 17, 2025.
On the other hand, mid-tenor bills have experienced sell pressure, likely as market participants seek liquidity.
The NOV-25 bill bore the brunt of this pressure, with yields rising by 91bps to 20.21% by the close of trading on Monday. Overall, as of March 17, 2025, the average T-Bills yield had expanded for the first time since early January 2025, rising by 10bps to 19.26% from 19.16% post-auction.
Given the above, our rate guidance is informed by the need to strike a balance between maximising investment returns and having a successful bid. Thus, the recommended stop rates for the respective instruments are as follows:
Source: Meristem
