CBN offers treasury bill above inflation rate in 2025

Central Bank of Nigeria in 2025 maintained risk premium on Treasury bills amidst disinflation, and stability of the local currency that signals a possible plan to print money, some analysts said, noting widening real interest rate according to investment bank review of the 2025 financial sector.

The apex bank according to them offered rates that are above inflation spot rates on Nigerian Treasury bills in 2025 despite a sustained reduction in headline inflation.

The wrote “The monetary policy authority rates pricing came in contrast to market expectation, and the surprise spot rates adjustment dislocated projections, an expectation that confused some economists.

“Nigeria, with a benchmark interest rate of 27% chasing a 14.45% consumer price index, left real interest rate at 12.55%, a trend that is unlikely to reverse due to reduction in pump price of petroleum.

“With the discount rate adjustment, analysts said the Apex Bank incentivised investors amidst efforts to balance short-term funds demand with maturities, though markets anticipated a slowdown in spot rates due to disinflation. 

“Nigeria’s inflation rate settled at 14.45% but the Apex Bank auctioned its one-year bills at 17.51% after two consecutive spot rates upward adjustments.

“The spot rate on 91 days bills rose by 20 basis points to 15.50% and the CBN increased the spot rate on the mid-tenor by 45 basis points to 15.95% at the last auction in 2025.

“It’s surprising to see spot rates surge given disinflation knowledge, Naira stability and expectation of an interest rate cut in the first quarter of 2026,” a slew of analysts said in a chat with MarketForces Africa.

Nigeria’s inflation continued to improve in November 2025, with the latest consumer price index from the National Bureau of Statistics showing headline inflation easing further to 14.45% year-on-year from 16.05% in October.

“The latest reading marked the eighth consecutive month of deceleration since the consumer price index (CPI) rebasing earlier in the year, reinforcing the narrative of gradually moderating price pressures across the economy.

“The sustained slowdown reflects notable easing in both food and core inflation, supported by calmer foreign exchange conditions and the lagged impact of tight monetary policy, investment banking firm Cowry Asset told investors in a note.

“The elevated Monetary Policy Rate at 27% and constrained liquidity levels appear to be gaining traction in tempering demand-side pressures.

“Excluding a brief uptick in March, headline inflation has trended downward consistently since the start of the year averaging 21.03% versus 33.03% in the same period of 2024. However, month-on-month dynamics tell a more nuanced story.

“Headline inflation accelerated to 1.22% in November from 0.93% in October, pointing to renewed short-term price volatility. This pickup was largely driven by energy-related pressures, with the energy index rising by 1.08% month-on-month, up from 0.50% previously, reflecting higher fuel and cooking gas costs.

“Food prices also edged higher, as the farm produce index increased by 0.79% after remaining flat in October. Services inflation climbed to 1.82% from 1.54%, while the goods sub-index rose to 0.79% from 0.63%, underscoring lingering cost pressures across key consumption segments.
Food inflation on a year-on-year basis printed at 11.08% in November 2025, a sharp 28.85 percentage-point decline from 39.93% in November 2024.

“This steep moderation is largely attributable to base-year effects following the CPI rebasing. On a month-on-month basis, however, food inflation rebounded to 1.13%, reversing two consecutive months of deflation, including a -0.37% reading in October.

“Elsewhere, the core inflation, which strips out volatile food and energy components, continued its downward trajectory. The core index eased to 18.04% year-on-year in November 2025, down from 28.75% a year earlier, representing a significant 10.71 percentage-point decline.

“This trend signals a gradual normalization of underlying inflation and points to improving medium-term macroeconomic stability. On a month-on-month basis, core inflation slowed to 1.28% from 1.42% in October, indicating softer underlying price momentum. Inflation pressures varied widely across states”.

Overall, Cowry Research said that “the headline inflation trajectory remains firmly disinflationary, underpinned by base effects and the impact of tight monetary conditions aimed at restricting excess liquidity amid an elevated policy rate at a record 27%.

“The investment firm expects core inflation to ease further, albeit gradually, as cost pressures from transport, housing and essential services remain sticky.

“Energy prices have been volatile, but their relatively small weight in Nigeria’s CPI limits their ability to significantly distort the headline figure.”

Other analysts at other Asset managers said they expect some reversal of the disinflation trend in December 2025, driven by festive-season spending, and renewed FX demand pressures linked to Christmas-related imports.

This is also expected to be offset by expectations for potential adjustments to PMS pump prices in December 2025.

These pressures are likely to show up more clearly in month-on-month readings, even as improved food supply dynamics and favourable base effects provide partial offsets.

Cowry projects headline inflation to edge up to 14.72% in December 2025, bringing the annual average inflation rate to 20.50%, underscoring that while progress has been made, short-term inflation risks remain very much alive.

Post-auction, mild buying interest returned to the secondary market, with sentiment slightly bullish and reversing the earlier bearish tone. This turnaround was largely driven by broad-based buying across the curve, as investors took advantage of the strong system liquidity.

Analysts at Meristem Securities Limited projected that stop rates will be around current levels, with a mild upward bias expected at the long end of the curve.

The Debt Management Office set the tone for rates repricing at its monthly auction. The debt office increased rates at the last bond auction despite ample system liquidity of N2.59 billion as of December 15, 2025, showing that yields remain tilted towards further uptick, strengthening our expectations.