- With N929bn bond settlement debit
- As DMO offers N700bn semi-monthly T-Bills
Nigerian money market remained resilient during the week despite significant funding outflows and the Monetary Policy Committee’s (MPC) decision to maintain a tight monetary policy stance.
System liquidity opened the week with a net surplus of N3.20 trillion, lower than the N4.68 trillion recorded in the previous week, largely reflecting a decline in balances at the Central Bank of Nigeria’s (CBN) Standing Deposit Facility (SDF).
Liquidity was subsequently boosted by N1.50 trillion in Open Market Operations (OMO) bill maturities, which provided substantial inflows into the banking system.
However, funding conditions tightened midweek following a N929 billion debit for the settlement of the Federal Government of Nigeria (FGN) bond auction.
Despite this liquidity withdrawal, elevated SDF balances helped cushion the impact, allowing system liquidity to close the week at a healthy N3.78 trillion, albeit below the previous week’s level.
Money market rates reflected broadly stable funding conditions despite the moderation in system liquidity.
The Overnight (OVN) rate declined marginally by 1 basis point to 22.12%, while the Open Repo Rate (OPR) remained unchanged at 22.00%, indicating that liquidity remained sufficient to meet short-term funding requirements.
Across the NIBOR curve, rates edged higher as the overnight, one-month, three-month, and six-month tenors increased by 3bps, 6bps, 7bps, and 17bps, respectively, suggesting that market participants continued to price in a prolonged restrictive monetary policy environment following the MPC’s decision to retain the Monetary Policy Rate (MPR) at 26.50%.
Meanwhile, the Nigerian Treasury Bills True Yield (NITTY) curve recorded mixed performance, with yields declining at the one-month (-11bps), three-month (-9bps), and twelve-month (-29bps) tenors, while the six-month tenor rose 26bps, reflecting stronger demand for selected mid-curve maturities.
The secondary Treasury bills market maintained its bullish momentum during the week, supported by sustained investor demand, particularly at the long end of the curve. Mild yield declines across the short- and medium-term maturities further reinforced buying interest, resulting in the average Treasury bills yield falling by 13 basis points to 18.27% from 18.40% in the previous week.
Looking ahead, we expect market liquidity to remain relatively comfortable, supported by N500 billion in OMO bill maturities.
However, the CBN is likely to conduct another OMO auction to sterilise excess liquidity and reinforce its tight monetary policy stance.
In addition, the Bank, on behalf of the Debt Management Office (DMO), is scheduled to conduct the semi-monthly Treasury bills auction, offering N700 billion across the 91-day (N100 billion), 182-day (N100 billion), and 364-day (N500 billion) maturities. Given the prevailing high-interest-rate environment and investors’ continued preference for risk-free assets, we expect the auction to attract strong subscription levels.
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