Nigeria’s Treasury bills secondary market closed the week on a bearish note as investors adjusted their portfolios to participate in Open Market Operations auctions.
The average yield across Treasury bill instruments increased by 16 basis points to 19.3%, reflecting increased selling pressure in parts of the market.
In the Nigerian Treasury Bills secondary market, the average yield rose by 42 basis points to 18.5%.
The increase was largely driven by investors unwinding existing positions to take advantage of the week’s OMO auction.
By contrast, the average yield in the OMO secondary market declined by 16 basis points to 21.2%.
The decline reflected sizeable unmet demand at the OMO auction, which subsequently filtered into the secondary market.
Strong Demand at NTB Auction
The Debt Management Office offered N700 billion worth of Treasury bills across different maturities at Wednesday’s auction.
Investor demand was significantly higher than the amount offered, reaching N4.41 trillion.
The DMO ultimately allotted N1.46 trillion, more than double the amount initially offered.
The strongest movement in stop rates was recorded on the 364-day instrument.
The stop rate for the 364-day Treasury bill increased by 24 basis points to 17.59%.
Meanwhile, the stop rates for the 91-day and 182-day instruments remained unchanged at 16.30% and 16.50%, respectively.
The strong demand highlights continued investor appetite for short-term Nigerian government securities despite relatively elevated yields.
Domestic Investors Gain Access to OMO Auctions
A significant development during the week was the Central Bank of Nigeria’s decision to allow domestic investors to participate directly, through Deposit Money Banks, in OMO Primary Market Auctions.
The CBN released a circular announcing the change on Wednesday.
The new arrangement could broaden participation in OMO auctions and influence liquidity distribution across Nigeria’s fixed-income market.
At Thursday’s OMO auction, the CBN offered N600 billion across different maturities.
Demand reached an impressive N4.93 trillion, substantially exceeding the amount offered.
The CBN ultimately allotted N2.60 trillion.
Stop rates settled at 20.39% for the 103-day tenor and 20.01% for the 138-day tenor.
Treasury Bill Yields Could Remain Volatile
The Treasury bills secondary market is expected to experience relatively stronger demand in the coming week, supported by resilient domestic investor interest and robust liquidity within the banking system.
However, NTB yields could remain volatile and retain a bearish bias as investors reposition ahead of expected OMO auctions.
As liquidity moves toward the OMO secondary market, OMO yields could decline further.
This could also encourage greater convergence between OMO and Treasury bill secondary-market yields as investors seek the most attractive risk-adjusted returns.
FGN Bond Yields Rise
Nigeria’s Federal Government bond market also ended the week on a bearish note.
The average yield across FGN bonds increased by 12 basis points to 17.0%, following selling pressure as investors unwound positions to participate in the OMO auction.
The increase was recorded across all major segments of the benchmark yield curve.
Average yields increased by 42 basis points at the short end, 5 basis points in the mid segment and 7 basis points at the long end.
The movements were driven by notable selling pressure on selected benchmark securities.
The March 2027 bond yield increased by 206 basis points, while the January 2035 and June 2038 bonds recorded increases of 21 basis points and 38 basis points, respectively.
Government Borrowing Keeps Bond Yields Elevated
Over the medium term, Nigerian government bond yields are expected to remain relatively high as the government continues to face substantial borrowing requirements.
The government’s financing needs could keep pressure on the fixed-income market as investors demand attractive yields to absorb additional supply.
However, stronger participation from both domestic and offshore investors could provide some support for the market.
In the near term, volatility is likely to remain elevated as investors position ahead of the DMO’s August 17 bond Primary Market Auction, where approximately N1.10 trillion is scheduled to be offered.
Expected OMO auctions could also influence investor positioning and liquidity conditions.
Naira Strengthens to N1,358.25 per Dollar
In the foreign exchange market, the naira recorded another weekly gain.
The currency appreciated by 0.5% week-on-week to N1,358.25 per US dollar, supported by improved foreign exchange supply.
The strengthening of the naira comes as Nigeria’s external reserves also continued to improve.
Gross external reserves increased by approximately $201.90 million to $52.26 billion as of August 13, 2026.
Higher reserves provide additional support for the country’s external position and could strengthen confidence in the foreign exchange market.
Naira Gains Across Forward Contracts
The naira also appreciated across the forward foreign exchange market.
The one-month forward rate strengthened by 0.5% to N1,380.62 per dollar.
The three-month contract appreciated by 0.5% to N1,418.41, while the six-month contract strengthened by the same margin to N1,471.91.
The one-year forward rate also improved by 0.5% to N1,578.86 per dollar.
The broad-based appreciation across forward contracts suggests improved sentiment around the naira’s near-term outlook, although market participants will continue to monitor foreign exchange supply, reserves and monetary policy.
Fixed-Income Markets Face a Busy Week
Nigeria’s fixed-income and foreign exchange markets are entering a potentially active period.
Treasury bill investors are adjusting their positions amid strong OMO demand, while the bond market is responding to government borrowing requirements and competing investment opportunities.
At the same time, improved foreign exchange supply and rising reserves have provided support for the naira.
Investors will be watching the DMO’s bond auction, future OMO operations, liquidity conditions and foreign exchange flows closely.
Overall, the combination of elevated yields, strong liquidity and improved currency stability could continue to create opportunities across Nigeria’s fixed-income and money markets, although volatility is likely to remain a key feature in the near term.
