By Dennis Agaba
Nigeria’s cost of borrowing eased on Thursday, February 19, 2026, as strong investor demand pushed yields lower across the fixed-income market. Treasury Bills, Open Market Operation (OMO) bills and Federal Government of Nigeria (FGN) bonds all rallied, signaling renewed appetite for naira-denominated assets and offering relief to government financing costs.
Data gathered from secondary market traders showed widespread yield compression across short, medium and long-term instruments. The decline suggests the Federal Government is now borrowing at slightly cheaper rates, supported largely by domestic institutional investors who continue to dominate the market.
Despite relatively tight liquidity conditions in the banking system, demand remained firm. Pension funds, asset managers and banks were active buyers, driving the bullish sentiment that has characterized recent sessions.
Treasury Bills Lead the Rally
Treasury Bills recorded the sharpest decline in yields as investors intensified purchases across most maturities. The average Nigerian Treasury Bill (NTB) yield fell by 14 basis points to 17.3%, marking one of the strongest weekly rallies in recent trading.
Across standard maturities:
- The 1-month paper declined by 12 basis points.
- The 3-month tenor eased by 8 basis points.
- The 12-month bill fell by 4 basis points.
- The 6-month tenor was the only outlier, rising by 14 basis points.
Particularly strong buying interest was observed in the 77-day, 105-day and 273-day bills, which saw yield compressions of 51 basis points, 50 basis points and 117 basis points, respectively.
By the close of trading, the NTB average yield stood at 17.33%, underscoring a broad moderation in short-term borrowing costs and reinforcing investor confidence in risk-free government instruments.
The bullish tone extended beyond the secondary market. At the Central Bank of Nigeria’s (CBN) Treasury Bills auction earlier in the week, stop rates came in lower, reflecting improved sentiment and strong subscription levels among domestic investors.
OMO Bills and FGN Bonds Join the Slide
The easing in yields was not confined to Treasury Bills. Other segments of the fixed-income market followed suit, strengthening the overall rally.
Average yields on OMO bills contracted by 6 basis points to 20.8%, indicating that investors continue to show appetite for high-yielding central bank instruments even as liquidity management operations remain active.
In the FGN bond market, average yields declined by 3 basis points to 15.9%, supported by buying interest concentrated at the short and mid-segments of the yield curve.
- The APR-2029 bond recorded a 5 basis point drop in yield.
- The APR-2032 bond saw a more pronounced 47 basis point compression, highlighting strong demand for medium-term sovereign debt.
By Thursday’s close, average FGN bond yields edged further lower to 16.03%, reflecting sustained participation by local institutional investors.
However, longer-dated bonds remained relatively flat, suggesting investors are still cautious about locking in funds for extended durations amid evolving macroeconomic conditions.
Eurobond Market Moves Differently
While domestic instruments rallied, Nigeria’s Eurobond market told a slightly different story. Yields on dollar-denominated sovereign debt edged up by 1 basis point to 6.90%.
The marginal uptick suggests weaker offshore sentiment, likely influenced by global risk factors and expectations around interest rate movements in advanced economies. With international investors closely watching U.S. Federal Reserve policy signals and global inflation trends, Nigeria’s external debt remains sensitive to shifts in global capital flows.
Signals from the Money Market
Even as fixed-income yields declined, short-term funding rates in the interbank market ticked slightly higher, reflecting marginal liquidity tightening.
- The overnight lending rate rose 4 basis points to 22.9%.
- The overnight Nigerian Interbank Offered Rate (NIBOR) climbed 7 basis points to 22.84%.
- The 3-month NIBOR increased by 8 basis points.
- The 6-month NIBOR eased by 3 basis points.
- The 1-month NIBOR remained unchanged.
- The Open Repo rate held steady at 22.50%.
These movements suggest that while investor appetite for government securities remains strong, liquidity conditions in the broader banking system remain relatively tight.
What This Means for Government Financing
The rally comes at a time when investors are increasingly pricing in the possibility of monetary easing later in the year, particularly if inflation continues to moderate. Market participants believe that easing price pressures could give the CBN room to consider adjustments to policy rates, further supporting bond prices.
At its most recent Treasury Bills auction, the CBN raised N1.91 trillion at lower rates. Stop rates—especially on the 364-day bill—came in significantly below previous levels, underscoring strong subscription levels and giving the apex bank leverage to reduce borrowing costs.
The broader implication is clear: renewed investor confidence in naira assets is helping to lower domestic borrowing costs at a critical time for government financing.
Domestic players—particularly pension funds and asset managers—have driven much of the yield compression, reinforcing the role of local institutional investors as the backbone of Nigeria’s fixed-income market.
A Supportive Window for the Government
For the Federal Government, the downward trend in yields provides a more supportive financing environment. With fiscal pressures still elevated and funding needs ongoing, cheaper domestic borrowing offers temporary relief.
However, analysts caution that sustainability will depend on macroeconomic stability, inflation trends, and monetary policy direction. Any resurgence in inflation or tightening in liquidity conditions could reverse the yield compression.
For now, strong demand across NTBs, OMO bills and FGN bonds has created favorable conditions for sovereign financing. The broad-based rally signals that investors remain comfortable with Nigeria’s risk profile in the domestic market—even as global uncertainties continue to influence external debt performance.
If current demand persists, Nigeria may continue to enjoy reduced borrowing costs in the near term, strengthening its capacity to finance fiscal operations at more manageable rates.
