Maximizing Yield: Real Estate vs Treasury Bills in Today’s Market

Maximizing Yield: Real Estate vs Treasury Bills in Today’s Market
If Risk-Free Returns Don’t Pay Well, Where Do You Turn?
As of March 26, 2026, Nairametrics reports that the CBN cut yields at the March 25 Nigerian Treasury Bills (NTB) auction—most notably on the 182-day and 364-day bills, which fell by 20 bps to about 16.4%—while the 91-day rate held at 15.95%. This occurred amid excess liquidity above ₦8 trillion and very strong demand for longer-tenor bills.

How this affects yield-driven real estate investors

1. Yield competition weakens
Lower NTB yields reduce the “risk-free” return investors can earn on government securities, making relatively high-yielding real estate (e.g., core-income assets, quality REITs, rental-cash-flow properties) more attractive by comparison.
Yield-driven investors may therefore begin shifting some capital from bonds into real-estate assets that offer stable, higher nominal yields—especially where rental and lease income is already contracted.

2. Potential for cheaper financing
The downward movement in yields signals gradual monetary easing. If this feeds through to commercial lending rates, developers and landlords may refinance or take on debt at lower costs, supporting margins and improving net-operating-income–based yields.

3. Valuation pressure
In a lower-yield environment, capitalization rates for income-producing real estate may compress slightly, pushing up prices for stabilized assets. This benefits investors who already own such assets, but it can disadvantage new buyers if prices rise faster than rents.

In short: lower NTB yields and persistent liquidity tilt the balance toward real estate as a higher-yield alternative. However, for new entrants, they also tighten yield spreads and may increase valuations for income-producing properties.

Recommendations

1. Prefer long-income rental assets in high-demand corridors
Target core residential and commercial properties in infrastructure-supported corridors (e.g., mid- to upper-tier areas of Lagos, Abuja, and Port Harcourt), where rental yields are projected to be roughly 8–18% in 2026.
Focus on locations with strong tenant demand, stable occupancy, and regular rental escalations to lock in yields that remain attractive relative to declining NTB rates.

2. Engineer your own yield spread
Where possible, refinance or structure debt at lower market rates if existing properties are already cash-flow positive. This widens the gap between financing costs and rental yields.
Avoid stretching into speculative or vacant high-ticket assets where yields are thin. Instead, prioritize properties with contracted, inflation-linked leases (e.g., logistics assets, prime offices, and family-oriented residential units).

3. Use NTBs as a tactical barbell
Maintain some NTB exposure for short-term liquidity and defensive allocation. However, consider rotating incremental capital into higher-yielding real-estate assets when NTB yields compress further.

In short: allocate a larger share of yield-focused capital to income-producing real estate (directly or through REITs) in high-demand corridors, and use declining NTB yields as an opportunity to secure stronger relative yield spreads when deploying or refinancing capital.

Mary Edet,
Private Real Estate Advisor.