The Central Bank of Nigeria (CBN) has pushed up borrowing costs on its flagship one-year Treasury bill.
At the debt auction held on Wednesday, August 12, 2026, the apex bank bumped the rate on 364-day bills up to 17.59%. The increase caught investors by surprise because demand for government paper was overwhelming.
Investors offered a staggering N4.4 trillion across three different investment periods. The central bank had originally asked to borrow just N700 billion.
Usually, when so much money is chasing fewer bills, the central bank lowers interest rates because it does not need to pay extra to attract investors. However, monetary authorities chose to do the exact opposite.
The decision represents a sharp turn from late July, when the central bank cut the one-year rate despite high demand.
This time, orders for the 364-day bill alone reached N4.19 trillion. That was more than eight times the N500 billion offered to the public.
Instead of taking advantage of the high demand to lower costs, the bank accepted N1.26 trillion in bids and raised the payout rate by 24 basis points from 17.35%.
The shorter options told a different story. The 91-day bill attracted N162.21 billion in demand and stayed flat at 16.30%. The 182-day bill struggled, pulling in only N63.97 billion out of the N100 billion requested, with its rate holding steady at 16.50%.
The rate hike comes on the heels of heavy cash injections flowing through Nigerian banks.
Around ₦2.48 trillion in old open market repayments settled on August 11, forming part of a massive ₦5.21 trillion cash injection over a single week.
When commercial banks sit on that much surplus cash, rates typically fall. Analysts note that the central bank is using high auction rates as a sponge to mop up extra money floating around, rather than simply trying to raise cheap funds for the government.
For everyday investors and money managers, the high payout means attractive returns on government-backed bills will linger longer than expected.
It also complicates predictions that the central bank would begin cutting interest rates at its upcoming September policy meeting.
- Media Report