N3.2 Trillion T-Bills Traded in March as CP Market Slumps by 58%
Nigeria's money market experienced a significant divergence in March 2026, with treasury bills (T-bills) issued by the Debt Management Office (DMO) surging to N3.2 trillion. This represents a notable 10.37% increase from February's N2.8 trillion, highlighting robust activity in the short-term government securities sector.
Investor Preference Shifts Toward Government-Backed Securities
At the same time, commercial paper (CP) issuance plummeted to N34 billion, marking a sharp 58.45% decline from N82.18 billion in the previous month. This contrast underscores a clear shift in investor preference toward government-backed securities, driven by stronger demand for risk-free instruments, elevated yields in the sovereign space, and tightening conditions in the corporate short-term funding market.
The increase in T-bill issuance reflects sustained activity in the short-term government securities market, where investors continued to demonstrate a strong appetite for safe and liquid instruments. Market operators noted that this robust uptake was supported by attractive stop rates and persistent liquidity management operations by authorities, which kept demand anchored in the fixed income space.
Treasury Bills as a Key Monetary Policy Tool
According to analysts, the rise also emphasizes the continued role of Treasury bills as a crucial funding and monetary policy tool. These instruments are used not only to meet short-term government financing needs but also to absorb excess liquidity within the financial system. The strong subscription levels suggest that institutional investors, particularly deposit money banks and asset managers, remained heavily positioned in sovereign instruments during this period.
In contrast, activity in the CP market weakened significantly, with only 10 CP issues quoted in March 2026, compared to higher volumes in the previous month. The total value of N34.14 billion represents a sharp contraction in corporate short-term fundraising, pointing to a temporary slowdown in issuance appetite among corporates.
Factors Behind the Commercial Paper Decline
Operators attribute this decline to a combination of factors, including earlier front-loading of funding in February, higher relative borrowing costs in the CP market, and increased competition from government securities, which continue to offer more attractive risk-adjusted returns. As a result, corporates appear to have either postponed issuance plans or relied more on internal funding and bank credit lines.
The widening gap between treasury bills and commercial paper activity highlights a broader structural trend in Nigeria's money market, where sovereign instruments continue to dominate investor allocation decisions, particularly in periods of cautious risk sentiment and elevated interest rates. March 2026 data points to a financial system increasingly skewed toward government securities, with corporate funding conditions remaining sensitive to liquidity cycles, pricing dynamics, and investor risk appetite.
Expert Insights on Market Implications
Vice President of Highcap Securities Limited, David Adonri, commented on the implications, stating that the month-over-month increase in T-bill issuance by the DMO indicates a growing shortfall in the Federal Government's revenue collection to finance recurrent expenditure. Adonri pointed out that this trend crowds out funds from the productive economy while simultaneously fueling inflation.
In addition, he highlighted that further listing of CPs on the Nigerian Exchange (NGX) could increase participation from both issuers and investors in the capital market. "It offers a good opportunity for investors to earn high returns from short-term investments compared to leaving deposits in bank accounts. It is also a potent mechanism for diversification and financial management," he said.
This analysis underscores the evolving dynamics in Nigeria's financial landscape, where government securities are gaining prominence amid shifting investor sentiments and economic pressures.
